High inflation and an overheated labor market are some of the reasons why Britain is now raising its key interest rate to 1.75 percent, according to Lars Calmfors, professor emeritus of economics. Something that he believes can be found in several countries right now.
– All central banks are in a process where they raise their key interest rates, which in the long run will dampen inflation but risks a downturn in the economy, he says.
The Swedish krona may become weaker
Even if a single announcement about a British interest rate increase does not have clear consequences in Sweden, Calmfors believes that in the long term we will be affected by economic downturns abroad.
– When other countries raise their interest rates, it normally means that the Swedish krona becomes weaker and our import prices increase more. This may increase the pressure on the Riksbank to raise the interest rate more in Sweden as well.
Hear Lars Calmfors tell more about the British interest rate hike and its consequences in the clip above.