There was no key rate cut on Thursday. The reason, according to the Riksbank, is that inflation, i.e. price increases, continues at a higher level than the Riksbank’s target of 2 percent.
But it gives Felicia Schoenprivate economist at Avanza, not much for.
“A betrayal of the Swedish people”
– Even though today’s unchanged interest rate announcement was very much expected, I can’t help but feel that it is a betrayal of the Swedish people, says Felicia Schön.
The policy rate is high at the same time as inflation continues to fall. It will be an unnecessary burden on households and businesses, she believes.
– It is high time to act with more reductions now so as not to risk putting the Swedes in an even worse economic crisis. What is the Riksbank waiting for, she says.
Prices continue to rise
In May, prices rose by 2.3 percent, and that is the main reason why the Riksbank kept the key interest rate unchanged on Thursday. This is because the Riksbank’s only weapon against inflation is the policy rate.
By keeping the policy rate high, since May 3.75 percent, households and companies are forced to exercise restraint. This causes the ether demand to drop, and it holds back the reins of the price increases that in 2022 and 2023 rushed away.
Several concerns, according to the Riksbank
Although the development is positive, there are several concerns which mean that the danger cannot yet be dismissed. The Riksbank believes that the policy rate therefore needs to be lowered step by step during the year and the years to come.
“There may be setbacks when inflation is adjusted to the target. This underlines the need for policy rate cuts to take place gradually,” writes the Riksbank.
Not independently, says Avanza
Felicia Schön believes the only reason for waiting with the reduction is that the fight against inflation has not gone as well in other countries. An argument that does not hold for an independent central bank, she believes.
– The Riksbank must be an independent central bank that acts according to what is needed for the Swedish economy. If the Riksbank doesn’t do it, we could still switch to the euro and let the European Central Bank decide the interest rate, she says and continues:
– The whole point of having its own currency is to have a central bank that acts for what is needed for its own country’s economy.
Several reductions ahead
But the future is bright, predicts Riksbank Governor Erik Thedéen.
“The conditions for inflation in line with the target even in the slightly longer term are good”, writes the Riksbank in a press release.
The Riksbank opens up for three reductions in the key interest rate after the summer, which would be good news for the mortgaged condominium owners and villa owners – in the long run.
The Riksbank is now the culprit in the drama
But while inflation was the culprit for the Swedes’ vulnerable financial situation last year and earlier this year, it is now the Riksbank that is putting the brakes on both companies and households.
Today’s announcement means that the relief for Swedes’ wallets will be delayed, says Felicia Schön.
– No reduction in the mortgage interest rate, no relief for hard-pressed condominium associations and still tough for entrepreneurs. Although the interest rate cuts have begun, it is still tough for many and I unfortunately do not think we have seen the last of notices and bankruptcies. Unemployment will rise more, she says.
But the future is bright
But with the interest rate cuts promised this autumn, she still believes that the future is bright.
– Hold on – but the relief will come in the autumn, concludes Felicia Schön.
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