Interest Rate Hikes Forecast
In its new Nordic Outlook report, the SEB Bank predicts that Swedish growth will remain strong this year and next.
The bank’s economists forecast Swedish GNP this year at 4.2 percent, and 3.2 percent in 2007. The report says inflation will be driven by high energy prices, but the underlying inflation will remain weak, and predicts that the Central Bank will increase interest rates more than necessary, with the repo rate reaching 4 percent at the end of next year.
Prospects for an immediate interest rate hike were fuelled by a report from Statistics Sweden Tuesday. The agency says retail sales maintained strong momentum in July, up 7.8 percent year-on-year.
Analysts believe the Swedish Central Bank will announce another 25 basis point increase in its key rate on Wednesday, which would put the repo rate at 2.5 percent.