Sweden’s Riksbank is set to continue tightening at all remaining meetings this year to a peak interest rate of 4.25%, as it needs to do more to control inflation, according to economists at Handelsbanken.
(Bloomberg) — Sweden’s Riksbank is set to continue tightening at all remaining meetings this year to a peak interest rate of 4.25%, as it needs to do more to control inflation, according to economists at Handelsbanken.
The bank’s analysts, who earlier expected a quarter-point rate increase to 3.75% this week to be the last of the current hiking cycle, now believe the Swedish central bank will move in similar steps at its coming meetings as well. The new forecast comes as the Swedish economy has proven more resilient than expected, with corporate profits remaining healthy and employment at record levels.
“While it is a fair assessment that Riksbank monetary policy is now somewhat restrictive, it appears to not be restrictive enough,” the bank’s senior economist Johan Lof said in a note to clients on Monday. “We judge that the Riksbank will need to raise the policy rate at a steady but gradual pace ahead.”
At the same time, the krona has hit record-lows against the euro, making it more difficult for the Riksbank to bring stubborn core inflation to heel, and leaving little room for divergence from peers that have recently turned more hawkish.
Handelsbanken, which on Monday also raised its forecast for Norges Bank’s rate hikes, said the more aggressive stance from other central banks “adds to the challenge for the Riksbank, which will need to raise its policy rate more than previously anticipated to have the desired effect on inflation through the FX channel.”
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