Not another rate hike

Not another rate hike

about 5 years ago1 min

On Wednesday, the US Federal Reserve broke ranks – raising its country’s interest rates while the Bank of Japan and Bank of England left theirs unchanged on Thursday.

But the US wasn’t alone in its “hawkish” actions. On Thursday, the Swedish central bank surprisingly announced it’d increase interest rates too.

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While economic data out of the US was strong enough to justify a fourth rate hike this year – at least according to the Fed – Sweden hasn’t been dancing to the music (ABBA, naturally) quite as hard 🕺

The Swedish economy is "entering a more mature phase", according to the central bank, which, like the Fed, lowered its growth forecasts for next year. The country’s interest rates have been negative since 2015 – and still are, despite the hike.

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After the late stages of a boom typically comes a bust. Sweden’s central bank might be raising rates now, despite the less than ideal conditions, in order to give it some firepower (by way of future rate cuts) to manage any further slowdown in the economy in the months or years to come.

Sweden’s currency, the krona (or “crown”), was the immediate winner on Thursday, gaining in value against the euro. But a report from TD Securities suggests there might be more to go, noting after the rally that “the market's initial reaction does not exhibit a strong demand to buy SEK”.

“Against this backdrop, we are inclined to see this pullback as an opportunity to enter tactical longs,” said TD – advising investors to sell euros and buy krona.

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