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Swedish interest rate hike "likely in April"

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12:26 CEST+02:00
Inflation in Sweden is creeping up and could be paving the way for a rise in interest rates within two weeks, say analysts.

And that could mean that increasing interest rate costs swallow part of the government's planned pre-election expenditure in areas such as child benefit.

The Riksbank has already raised the key interest rate twice this year, taking it from a record low of 1.5% to 2.0%. Most analysts have been anticipating a pause, with a third increase in June. But recent statistics have strongly increased the chances of an interest rate rise in April.

The prices of small houses, a factor which worries the Riksbank, are continuing to rise despite the previous rate hikes. Employment is increasing and the consumer price index is climbing faster.

"The labour market is better than the Riksbank expected. There's no panic but there is slightly higher inflationary pressure and, looking forward a year, that will increase further," said Peter Kaplan, a strategist at Handelsbanken.

"That would mean a rise in April, even if the market doesn't think so in the current situation."

The deputy governor of the Riksbank, Irma Rosenberg, will give a speech on April 19th which could be used to indicate a possible rise - in line with the bank's policy of clearly signalling an increase in advance.

The bank's previous rate hikes this year have been criticised by the Social Democrats.

Both party secretary Marita Ulvskog and the head of the union organisation LO, Wanja Lundby-Wedin, said the rises were unnecessary, while prime minister Göran Persson has said that he cannot see any inflationary pressure in the economy.

TT/The Local

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