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LIBOR

UK bank scandal must be ‘looked into’: Pagrotsky

The Libor scandal in London may have caused economic damages for Swedish tax-funded businesses, and ought to be looked into, said the Social Democrats’ tax investigator Leif Pagrotsky.

UK bank scandal must be 'looked into': Pagrotsky

Pagrotsky called the Libor-rate an “international benchmark” with effects spreading far beyond London, reported the newspaper Svenska Dagbladet.

A scandal of Liborgate’s magnitude threatens to affect the public’s confidence in the entire market and the bank system globally, including Swedish banks, he emphasized.

Annika Falkengren, CEO of Swedish bank SEB, is also concerned of what effect the Libor scandal may have on the banking system.

“It’s devastating as a bank manager,” she said to Svenska Dagbladet.

Falkengren was unable to guarantee that interest rate manipulation could not occur in Sweden.

“That’s really hard to guarantee. However, the Swedish Stibor market is far smaller. But it’s in the industry’s interest to help clean up,” she said.

On their own initiative starting a few years ago, Swedish banks have been looking into how to make the Stibor rate, the Swedish equivalent of Libor, more transparent.

The Stibor rate is the interest rate that Swedish banks give each other.

Sweden’s Riksbank recently concluded in its stability report that the Swedish Stibor rate is functioning well, Falkengren noted.

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ECONOMY

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.” 

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