Sweden Lifts Key Rate But Signals Likely Peak

September 4, 2008

A 25-basis point rate hike to 4.75% had been widely analysts and essentially pre-announced by Riksbank officials.  However, a statement released today cut the central bank’s inflation and growth forecasts.  More importantly, projected future levels of the repo rate no longer show any further rate increases and instead embody the start of an easing cycle in 2009.  Since the start of 2006, there had been 13 rate hikes.  CPI inflation remains at a 15-year high and well above target.  But economic growth in Sweden has slowed to a four-quarter rate of only 0.7%.  Analogous to ECB policy, I expect no more Swedish central bank rate changes in 2008.


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