In January, inflation, excluding energy prices, rose unexpectedly to 8.7 percent. The Riksbank has previously announced an increase in the key interest rate of 0.5 percentage points, but that figure was based on a more optimistic inflation forecast.
– I am concerned that this may trigger the Riksbank to continue with its excessive interest rate increases, which have very negative effects on ordinary people’s lives and finances, says Torbjörn Hållö, economist at LO.
Want to strengthen the crown
One of the reasons why Riksbank governor Erik Thedéen announced an interest rate increase is the hope that it will strengthen the Swedish krona’s exchange rate. Annika Winsth, chief economist at Nordea, believes that the target could lead to further interest rate increases and worries about how it could affect households.
– If you are going to raise the interest rate in order to strengthen the krona, then you can take so much that you break both the Swedish economy and the housing market. Households should rise to cope with up to one percentage point higher interest than they pay today, she says.
Klas Eklund, who is an economist at the law firm Mannheimer Swartling, also believes that more interest rate increases await and fears that it could have serious consequences.
– It probably has to get worse before it gets better. The economy needs to cool down even more, and that is what is now happening. The mortgage interest rate has not peaked yet, it will eat into the household budget. Inflation has not peaked yet and it will squeeze households even more, he says.
Affects younger generation
An interest rate shock may affect everyone, but there is an age group that is particularly vulnerable to the Riksbank’s interest rate announcement.
– I think the consequences can be very serious because we are so highly leveraged, and those who are most leveraged are younger people. Older people can cope significantly better, while it can hit younger people extremely hard, says Torbjörn Hållö.
Hear why younger people are hit hardest by a higher interest rate in the video.