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RIKSBANK

Riksbank chief misses rate meeting

Swedish Riksbank head Stefan Ingves missed a key monetary policy meeting on Monday morning as he was travelling overland from Spain due to a Swedish airspace shutdown.

Riksbank chief misses rate meeting

“He can’t take part, either personally or on the telephone. He is on his way home from Madrid in a vehicle through Europe,” Tomas Lundberg at the Riksbank said on Monday.

The meeting was opened at 9am on Monday morning. The decision taken at the meeting over whether to change base rates will be made official at 9.30am on Tuesday.

Deputy governor Barbro Wickman-Parak did, in contrast to Ingves, make it back in time for the meeting. Wickman-Parak had been in Iceland, where a volcanic eruption last week caused a cloud of ash to form that prompted several European aviation authorities to shut down vast tracts of airspace. The deputy governor was able to get to Trondheim in Norway on Sunday and continue by coach back to Stockholm overnight.

Many economists expect the Riksbank to raise the record low rates quite soon.

“Our main scenario is that the Riksbank raises the rate in July but we have also said that we can not rule out April. And if it hangs in the balance then the prospect of a hike in April is reduced somewhat by Ingves’ absence,” said Annika Winsth at Swedish bank Nordea.

“But as we have stated, April is not our projection. My view is that Ingves has changed tack, but it is difficult to say whether he has made enough of a shift to raise rates now. But our assessment is that strong enough signals have been emitted to suggest we can not completely discount April. It is possible that others could consider it worth waiting until July when Ingves is not there, but it is a close call,” she said.

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ECONOMY

Riksbank deputy ‘open to reconsidering raising rates in April’

Martin Flodén, the deputy governor of Sweden's Riksbank, has questioned whether the central bank needs to bring in further rate rises in April, following bank runs on two niche banks in the US and a crisis of confidence at Credit Suisse.

Riksbank deputy 'open to reconsidering raising rates in April'

Uncertainty in the financial market following bank runs in the US and a crisis at Swiss bank Credit Suisse could have changed the playing field, he told TT in an interview. 

“It affects which level the key interest rates need to be in order to have a contractive effect,” he said, referring to the recent days of financial market turbulence. “We can’t just look at key interest rates by themselves. It’s the key interest rate in combination with all of these developments which determines how tight financial policy will be.”

He said it was not yet obvious what decision should be taken. 

“It’s clear that monetary policy needs to stay tight, but what level of interest is that? We need to assess all of the current developments there.” 

‘Could go in different directions’

In theory, there could be such a serious financial crisis, with such a severe effect on lending and banks’ financing costs, that the central bank would be forced to adopt supportive measures, even lowering the key rate.

Flodén doesn’t think Sweden is in that situation, although he thinks there’s a possibility it could happen.

“It’s not something I can see happening right now, at least, although this could go in different directions.” 

He added that he doesn’t see any reason for any “special concern”, toning down the risk that a crisis for two smaller niche banks in the US and at Credit Suisse could affect the Swedish financial system.

“Of course, it could lead to some stress, but there aren’t actually any particular signs in Sweden, which are worrying me,” he said. 

Flodén is one of six members of the Riksbank executive board, led by Riksbank chief Erik Thedéen, responsible for making a decision on whether interest rates will go up again at the end of April.

The Riksbank has indicated that a rate hike of between 0.25 and 0.5 percent from the current 3 percent rate could be necessary.

Flodén described the most recent inflation statistics for February, where inflation unexpectedly rose to 12 percent, as “not good at all”. So-called KPIF inflation, where the effect of mortgage rates is removed, rose from 9.3 percent to 8.7 percent in January. The Riksbank’s goal is 2 percent.

“It’s clear that inflation is still far too high and that monetary policy needs to be focussed on combatting inflation,” he said, adding that inflation statistics for March will be released before the central bank is due to make a decision on whether to raise rates or not in April.

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