Ingves: Interest rates stable all year

The head of Sweden's central bank has said he expects Sweden's interest rates to remain at their current low level in 2012, but warned banks that they must be more open about how much they earn from lending to customers.

Ingves: Interest rates stable all year

Governor Stefan Ingves defended the Riksbank’s policies, despite concerns that banks are not passing on lower interest rates to borrowers:

“Our interest rate decisions have an impact, even if they do not have an immediate effect. The monetary policy of Riksbanken is still effective in terms of capital management,” Ingves told the Dagens Nyheter daily.

But, he said, banks should have “clearer policies as to how they declare their margins.”.

Concerns were raised after last December’s interest rate cut, as banks were slow to follow suit and cut mortgage rates.

On the broader economic outlook, Ingves said Swedish banks’ reliance on international loans made it harder to maintain stability. However, he said Swedes had reason to be optimistic about the year ahead, despite great financial turmoil in the world.

“Sweden has a steady position with low debts and a balanced government budget. Expectations both for inflation and long-term inflation remain under control. Meanwhile, financial growth and productivity have developed well,” he told DN.

While Sweden’s export figures represent half of its gross domestic product it also has strong capital flows, which strengthens the positive outlook, according to Ingves.

The purchasing index in Sweden, which reflects industrial economic activity, was on the up in December coming in at 48.9 percent, compared to 47.6 percent the previous month.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Sweden’s Riksbank raises rates above zero for first time since 2014

Sweden's central bank has increased its key interest rate to 0.25 percent, marking the first time the rate has been above zero for nearly eight years.

Sweden's Riksbank raises rates above zero for first time since 2014

In a press release announcing the move, the bank said that it needed to take action to bring down the current high rate of inflation, which it predicts will average 5.5 percent in 2022, before sinking to 3.3 percent in 2023.

“Inflation has risen to the highest level since the 1990s and is going to stay high for a while. To prevent high inflation taking hold in price and wage developments, the directors have decided to raise interest rates from zero to 0.25 percent,” it said. 

The Riksbank, which is tasked by the government to keep inflation at around two percent, has been caught off-guard by the speed and duration of price rises.

Just a few months ago, in February, it said it expected inflation to be temporary, predicting there was no need to increase rates until 2024.

The last time the key inflation rate was above zero was in the autumn of 2014. 

In the press release, the bank warned that the rate would continue to increase further in the coming years. 

“The prognosis is that the interest rate will be increased in two to three further steps this year, and that it will reach a little under two percent at the end of the three-year prognosis period,” it said. 

According to the bank’s new future scenarios, its key interest rate will reach about 1.18 percent in a year, and 1.57 percent within two years. 

In a further tightening of Sweden’s monetary policy, the bank has also decided to reduce its bond purchases. 

“With this monetary policy we expect inflation rates to decline next year and from 2024 to be close to two percent,” the bank wrote. 

Annika Winsth, the chief economist of Nordea, one of Sweden’s largest banks, said the rate hike was “sensible”. 

“When you look at how inflation is right now and that the Riksbank needs to cool down the economy, it’s good that they’re taking action – the earlier the better. The risk if you wait is that you need to righten even more.” 

She said people in Sweden should be prepared for rates to rise even further. 

“You shouldn’t rule it out in the coming year. Then you’ll have a once percentage point increase which will go straight into fluctuating mortgage rates.”