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Sweden’s central bank ‘still planning to raise interest rates in April’

The governor of Sweden's Riksbank central bank has told MPs he still intends to raise rates by at least 0.25 percentage points in April, despite the failure of several banks in the US.

Published: 14 March 2023 15:17 CET

Sweden's central bank 'still planning to raise interest rates in April'

The governor of Sweden's Riksbank Erik Thedéen, is questioned by the Committee on Finance in the Swedish parliament. Photo: Screenshot

“We intend to increase [the core interest rate] by 25 points,” Erik Thedéen said when questioned by the Swedish parliament’s finance committee about the impact of the US bank failures on monetary policy in Sweden.

But he said that his team at the bank would continue to monitor the situation.

“We do not see any risks here and now, but we have a group at the Riksbank which is working 24/7 and following the developments and I expect that the Swedish Government Offices and the Swedish Financial Supervisory Authority are doing the same.”

Interviewed by the TT newswire after his appearance in the parliament, Thedéen said that the failure of Silicon Valley Bank and Signature Bank in he US would without doubt affect Sweden.

“It’s absolutely clear that what is happening in the financial markets now will have an impact on the data. It will, for example, be significantly more expensive for companies to finance themselves and it could be so that that will affect people’s willingness to consume and invest,” he said.

“The big spillovers for the Swedish economy are through lending costs, share price developments and the demand situation,” he said.

However, Thedéen said that it remains his judgement that the risks to Sweden’s economy from overly high inflation exceeded those that would result from further increasing interest rates.

“Inflation is worse than rent hikes,” he said. “We have a broad based inflation which we still haven’t been able to reverse in any clear way.”

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Tax deadline and Eurovision tension: What changes in Sweden in May?

Don’t miss: Sweden’s tax deadline

Tax returns were sent out weeks ago, so you may already have declared your taxes. But if you haven’t, May 2nd is the final deadline.

If you’re unable to file your tax return on time, then you need to apply for a two-week extension by the May 2nd deadline. If the Tax Agency approves your extension, you’ll have until May 16th to submit it. You can apply for this extension online using your digital ID, or call the agency.

If you’ve already submitted your taxes, but you realise you need to make changes, you can do so online until December 18th. In fact, you can make changes to tax returns from up to six years back, but in that case you need to do so by sending a letter to the Tax Agency.

Before you click submit, make sure you’ve not missed out on these essential deductions.

Time to slash the interest rate?

Sweden’s central bank, the Riksbank, will announce its next decision on the country’s so-called policy rate on May 8th.

This is a crucial announcement as the policy rate is the bank’s main monetary policy tool. It decides which rates the banks of Sweden can deposit in and borrow money from the Riksbank, which in turn affects the banks’ own interest rates on savings, loans and mortgages.

Sweden’s policy rate is relatively high at the moment, 4.0 percent (the highest since 2008), because of the Riksbank trying to bring down inflation. If bank interest rates are high, it’s expensive to borrow money, which means people spend less and as a result inflation drops.

But now that inflation is on its way down, Riksbank chiefs themselves have said that they think it’s likely that they will cut the policy rate in either May or June, and several economists predict that the cut is going to come sooner rather than later, which would mean in May.

Once the cut comes, you should be able to see a knock-on effect on, for example, the cost of your mortgage, so lenders and home-owners will be keeping a close eye on what happens on May 8th.

Swedish passports get 25 percent more expensive

The cost of getting a Swedish passport was to be hiked by 25 percent on May 1st, from 400 to 500 kronor.

The higher fee applies to all appointments on or after May 1st, even if you booked them before that date.

According to a government press release, the higher fee is necessary to “maintain the level of service” and ensure that the police authority’s revenue from the fees covers the cost, as passport operations are funded by fees.

Controversial Eurovision Song Contest to be held in Malmö

The Eurovision Song Contest – Europe’s by far biggest music competition – is heading to Malmö Arena in southern Sweden in May, with the first semi-final kicking off on May 7th, followed by the second semi-final on May 9th and culminating in the final on May 11th.

It’s a highly-anticipated event, albeit this year with a mix of joy and trepidation.

The row over whether Israel should be allowed to participate after its brutal retaliatory attack on Hamas and Gaza has led to protests (at least half a dozen applications have been filed for demonstration permits) and artists pulling out of performing at Eurovision side events.

Swedish broadcaster TV4 reports that ten percent of volunteers have already pulled out, and Moriskan, an event venue that was set to organise Euro Fan Café for Eurovision fans, has also cancelled its participation, despite being in the middle of Eurovision Village. “Our assessment is that we could risk our future if we go through with the event,” its CEO Ozan Sunar told the Sydsvenskan newspaper.

Malmö is home to more than 360,000 people and 186 nationalities, and a large part of the city’s population is of Palestinian origin.

Add to that the fact that security was already likely to be tight at the event, after Sweden last year raised its terror alert to four on a five-point scale.

More than 100,000 people are expected to visit Malmö during Eurovision week, and police reinforcements are being brought in from Denmark and Norway.

Swedish economy set for Swift revival?

We hesitate to write this, but Eurovision may in fact not be Sweden’s most significant music event of the year, or even in the month of May.

In mid-May, Taylor Swift is coming to Stockholm. The megastar is set to play three gigs at Friends Arena, on May 17th-19th, the only stop she’ll make in Scandinavia as part of The Eras Tour. And we’re not just keeping an eye on this as Swifties, but because of the economy.

“Swiftonomics” has already become a global concept, as cities where she plays tend to see a brief bump in revenue as fans descend on the city, buying hotel tickets and eating in restaurants. She’s expected to have a 417,900,000 kronor impact on the Swedish capital, according to the Stockholm Chamber of Commerce. A similar phenomenon was seen last year, when Beyonce launched her global tour in Stockholm.

Whether this is good or bad depends on your viewpoint. On the one hand, it kicks the economy into action, which could bring a much-wanted GDP boost. On the other hand, it may drive up the inflation rate at a point when Sweden and the Riksbank are hoping for the opposite.

That said, it has been questioned how much of an effect single events like these actually has on inflation.

Regardless, expect it to be a talking point in the coming month. And if you’re planning a trip to Stockholm for reasons other than Taylor Swift, you may want to consider scheduling your visit for dates other than May 17th-19th to avoid the hordes of fans and marked up hotel prices.

Holidays and other dates

May 1st, a day for celebrating workers’ movements, has been a public holiday in Sweden since 1939. Expect to see rallies organised by left or centre-left parties and organisations, but otherwise not much happens on May 1st in Sweden other than most people having the day off.

Ascension Day, which this year falls on May 9th, is also a public holiday in Sweden. Known as Kristi himmelfärdsdag in Swedish (or colloquially Kristi flygare – “flying Christ”), it marks the day when Christians believe Jesus ascended into heaven. But as Sweden is a relatively secular country, unless you don’t go to church you’re unlikely to notice anything remarkable – again, other than getting a day off.

Mother’s Day in Sweden falls on the last Sunday of May, this year May 26th. It is not a public holiday.

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