Riksbank votes no to base rate hike

Riksbank votes no to base rate hike
The Swedish Riksbank has decided to leave base (repo) interest rates unchanged at 0.25 percent, it was announced on Tuesday.

The Riksbank met on Monday to decide over whether to raise rates for the first time since just before the collapse of Lehman Brothers and the onset of the credit crunch in September 2008.

“The Executive Board of the Riksbank assesses that the repo rate needs to remain at a low level to support production and employment and to attain the inflation target,” the bank wrote in a statement on Tuesday.

The bank stated that the first rate hikes can be expected in “the summer or early autumn”.

The bank’s statement set an upbeat tone over the Swedish economy which is showing firm indications of recovery with a positive GDP forecast for 2010 on the back of a very weak 2009. The bank underlined that the low interest rate and expansionary fiscal policy will provide support to consumption, which has begun to increase.

The bank described the recovery in the labour markets as having come surprisingly early in the economic cycle.

“One sign that the Swedish economy is recovering is that employment has begun to increase and unemployment has stopped rising, which indicates a labour market turnaround.”

But it was noted that unemployment remained at a relatively high level with wage rises expected to remain accordingly low. Together with higher productivity and a stronger krona, inflationary pressures are forecast to remain relatively low over the coming years, the bank advised.

The bank left its forecast for inflation, GDP and the repo rate unchanged with the latter expected to return to 4 percent in the first quarter 2013.

Governor Stefan Ingves was unable to attend the meeting as he was in transit from Madrid, travelling overland due to the Swedish airspace shutdown.

Member comments

Become a Member to leave a comment.Or login here.