Hike rates

POLL-Swedish c.bank to hike rates by June as inflation forces U-turn

Benchmark rate currently at 0%

Three of 16 see the first hike this week, 9 see the June hike

The policy rate will reach 1.00% by the end of 2023 – median forecast

Balance sheet down this year

Political decision expected Thursday 07:30 GMT

Link to data: Reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?RIC=SERATE%3DECI

STOCKHOLM, April 25 (Reuters)Sweden’s central bank is expected to start raising interest rates by June and may even do so this week as soaring inflation forces a sharp move away from ultra-loose policy, a poll showed on Monday. from Reuters analysts.

The Riksbank has kept its benchmark rate at 0% since the end of 2019 and, under its current policy trajectory, does not foresee any hike before the end of 2024, although several of its policymakers have questioned this prospect.

Russia’s invasion of Ukraine, which Moscow calls a “special military operation”, has worsened supply chain bottlenecks already strained by the COVID-19 pandemic and pushed up fuel prices .

This had repercussions for a basket of consumer goods, and David Oxley, senior economist at Capital Economics, said Sweden’s rate path was now “woefully out of date”.

Of 16 analysts surveyed, three, including Oxley, forecast the Riksbank to rise 0.25% on Thursday. Two of this trio said it would rise again in June, when seven analysts predicted the first rise would occur.

The policy rate will reach 1.00% at the end of 2023, according to the median forecast of the survey.

The Riksbank is also expected to allow its balance sheet to start shrinking this year, another reversal of current policy.

Central banks around the world have been forced to change tack as price increases have proven to be more persistent and widespread than expected.

The US Federal Reserve and the Bank of England are among those that have started raising rates, while the European Central Bank is expected to follow suit as soon as July.

But the uncertainty is high. Growth slows and inflation erodes purchasing power. Rate hikes will drive up mortgage costs and hurt consumption, and central banks want to avoid putting the brakes on too hard. They can’t do much about higher energy costs.

Analyst forecasts for rates differed widely in the poll.

The most hawkish forecast – Oxley’s – was for the benchmark rate to settle at 2.00% by the end of 2023.

Meanwhile, markets expect at least three Swedish rate hikes by the end of the current year. 0#RIBA=

At its last meeting in February, a divided Riksbank expected no rate changes until the end of 2024, but several policymakers have since called that unrealistic.

The Riksbank will publish its policy decision at 07:30 GMT on April 28.

Swedish rate and inflation:http://tmsnrt.rs/1qEN4Rz

(Reporting by Simon Johnson; editing by John Stonestreet)

(([email protected]; +46 70 721 1045; Reuters messaging: [email protected]))

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