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Riksbank interest rate hikes 'in doubt': experts

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11:57 CEST+02:00
Swedish experts have expressed scepticism that the Riksbank will raise base interest rates when it meets to discuss monetary policy on September 6th, after a renewed day of stock market turbulence in Stockholm.

Annika Winsth, chief economist at Nordea, is among those expecting the Riksbank to hold rates at the current level.

"If the mood is the same when they enter the meeting, then we don't believe they will raise rates. At the moment the market is very negative, more or less free-fall," Winsth said.

She added that the development is so dramatic that it is impossible to predict how the situation will be in September and what the Riksbank's decision will be.

Swedbank meanwhile has retained its forecast that the Riksbank will raise interest rates again this year, but recognised that the current market turmoil increases uncertainty over the bank's plans.

"We have an increase in September in our official forecast, but it is clear that there is a downside risk to it in the current situation," said Martin Tallroth, interest rate strategist at Swedbank.

Tallroth added that it is "entirely possible" that the Riksbank would leave rates unchanged for the remainder of 2011.

"Absolutely, it is entirely possible. But our official forecast is for an increase for this year," he said.

Riksbank's interest rate forecast, published on July 5th, indicating a further two rate hikes of 0.25 percentage points each, to 2.5 percent by the end of the year.

The Stockholm stock exchange oscillated wildly on Tuesday in a second day of market turbulence. After initial falls in the OMXS index of as much as -4.3 percent, the market rebounded to around -0.8 percent by lunchtime.

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