During Wednesday evening, the US key interest rate was raised once again by 0.75 points, thereby raising the interest rate to 3.75 – 4.00 percent. The interest rate increase was expected. What the market was waiting for was whether Powell would signal a clear turning point for when interest rate hikes enter a quieter phase – that didn’t happen.
– It was a little surprising. The market interpreted it as the interest rate will probably rise a bit above 5 percent before the Fed feels ready, says SEB’s chief economist Jens Magnusson.
On the Stockholm Stock Exchange, the anxiety was mainly felt through falling stock market quotations. Magnusson believes that it is mainly due to the fact that the market took notice of the announcement of more interest rate increases.
– What affects the American stock market also affects Swedish and European stock markets with a delay. This shows that the Fed’s interest rate decision is also important for Sweden – for example via the stock market and savings.
The Riksbank: “We conduct an independent monetary policy”
The Riksbank also confirms that we are affected by what happens in the world around us.
– If other central banks raise their key interest rates, this means that their interest rates will also come down. It will indirectly affect Sweden as well, says the Riksbank’s press manager Tomas Lundberg.
The Riksbank’s key interest rate is currently 1.75 percent. The bank’s own forecast points to a new peak in February 2023.
Does the Fed’s decision mean that the Riksbank will automatically raise the Swedish policy rate, and on the same scale?
– No, we pursue an independent monetary policy, he says.
The private economist: Expect the variable interest rate to rise
Swedish households are some of the most interest-sensitive in the world. According to Swedbank and Sparbankerna’s private economist Arturo Arquez, this is primarily due to two things: High indebtedness in combination with a high percentage of variable interest.
– Swedes have a penchant for floating interest rates, which over time have proven to be the cheapest, but it has a big effect when the interest rate moves, he says.
Swedbank estimates that the Swedish key interest rate will rise by 1.25 percentage points by February 2023. This will also be felt in mortgage rates. For Swedish households, this means SEK 730 more per month after full interest deduction, if you have borrowed SEK one million.
– The message to households is: expect the variable interest rate to rise to the same extent as the policy rate, says Arturo Arquez.
Watch SEB’s chief economist Jens Magnusson explain how the Swedish stock market is affected by the American economy and interest rate hikes in the video above.