SHARE
COPY LINK

ECONOMY

Riksbank keeps rates stable amid slow growth

Sweden's central bank said on Thursday it's leaving the benchmark interest rate, the repo rate, unchanged at one percent, but did adjust its interest rate forecast downward.

Riksbank keeps rates stable amid slow growth

“Anything other than an unchanged rate would have been a surprise,” Heidi Elmér, head economist at Skandia bank, told the TT news agency.

In its previous interest rate prognosis, the Riksbank forecast that the repo rate would be at 1.25 percent by the end of 2014, but Thursday’s interest rate decision forecasts the interest rate will only be at 1.15 percent.

However, the Riksbank was generally upbeat in its prognosis for the Swedish economy, despite forecasting slightly lower growth.

“Following the slowdown in recent years, the outlook for the Swedish economy is brightening. There has been some improvement in the labour market and this is expected to become clearer during 2014,” the central bank said in a statement.

“There are signs of an improvement in the euro area and the recovery in the United States is continuing. However, major challenges still remain.”

Previously, the Riksbank had forecast the Swedish economy would grow by 1.2 percent in 2013, but that figure has been adjusted downward to 0.7 percent. Economic growth is expected to pick up in 2014, landing at 2.6 percent, before inching up to 3.5 percent in 2015, figures more or less on par with the Riksbank’s previous forecasts for the years ahead.

The Riksbank set the continued economic recovery abroad will have positive effects on the export-dependent Swedish economy and that low interest rates and expansionary fiscal policy will help buoy Swedish consumer spending.

“Growth in Sweden is thus expected to be gradually higher, which means that employment will rise at a faster pace and unemployment will fall,” the Riksbank said.

Riksbank Deputy Governors Karolina Ekholm and Martin Flodén entered reservations against the decision to keep the repo rate at one percent, arguing it should be lowered to 0.75 percent.

While some have criticized the Riksbank for keeping interest rates too high, Skandia’s Elmér thinks the bank made the right decision.

“It’s clear there are reasons to lower it a step, when looking at inflation. But we see signs that the economy is beginning to heat up. Then there are other factors like imbalances among households, with high debts and home prices that are creeping up. In this case, I think we should wait to change rates,” she said.

TT/The Local/dl

Follow The Local on Twitter

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

MONEY

Italy expands €200 payment scheme and introduces public transport bonus

Italy's government will extend its proposed one-time €200 benefit to more people and introduce a €60 public transport payment, Italian media reported on Thursday.

Italy expands €200 payment scheme and introduces public transport bonus

Seasonal workers, domestic and cleaning staff, the self-employed, the unemployed and those on Italy’s ‘citizens’ income’ will be added to the categories of people in Italy eligible for a one-off €200 payment, ministers reportedly announced on Thursday evening.

The one-time bonus, announced earlier this week as part of a package of financial measures designed to offset the rising cost of living, was initially set to be for pensioners and workers on an income of less than €35,000 only.

However the government has now agreed to extend the payment to the additional groups following pressure from Italy’s labour, families, and regional affairs ministers and representatives of the Five Star Movement, according to news agency Ansa.

Pensioners and employees will reportedly receive the €200 benefit between June and July via a direct payment into their pension slip or pay packet.

For other groups, a special fund will be created at the Labour Ministry and the procedures for claiming and distributing payments detailed in an incoming decree, according to the Corriere della Sera news daily.

One new measure introduced at the cabinet meeting on Thursday is the introduction of a one-time €60 public transport bonus for students and workers earning below €35,000. The bonus is reportedly designed to encourage greater use of public transport and will take the form of an e-voucher that can be used when purchasing a bus, train or metro season pass.

Other provisions reportedly proposed in the energy and investment decree (decreto energia e investimenti), which is still being adjusted and amended, include extending energy bill discounts, cutting petrol excise duty and rolling on the deadline to claim Italy’s popular ‘superbonus 110’.

The €14 billion aid package, intended to lessen the economic impact of the war in Ukraine, will “fight the higher cost of living” and is “a temporary situation”, Prime Minister Mario Draghi has said.

The Local will report further details of the payment scheme once they become available following final approval of the decree.

SHOW COMMENTS