Brighter economic future ahead for Sweden?

Swedish Rates on Hold

The Swedish central bank announced Wednesday that it will keep its key repo interest rate unchanged at the record low level of 0.25%. Also, the bank maintained that the rates will remain low until autumn 2010, when a return to more normal levels is expected.

In general, a more optimistic view of the economic situation in Sweden was delivered, although the analysts maintained that we are not out of the woods yet.

Once again the bank’s rate setters were of different minds, with the deputy governor Lars Svensson wanting a cut to zero, while two of his colleagues, Lars Nyberg and Barbro Wickman-Parak, were of the opinion that the rate should be raised sooner than proposed, according to Swedish Radio News.

The Central Bank is a bit more optimistic of the GDP for 2010 and is expecting a growth of 2.7% compared to the 2.5% in the October prognosis. The bank has also revised their inflation prognosis to 0.8% for 2010 and 3% by 2011. The labour market figures have been revised to unemployment at 10.3% at the end of 2010 – 0.2 percentage points lower than previously predicted. Wages are expected to rise by 2.5% per annum over 2010-2012 and the Swedish Krona is believed to be strengthened over the next three years.

Comments from financial experts are so far in agreement, although many maintain that rates are likely to be raised in the spring - sooner than the analysts at the central bank have predicted.

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