Riksbank Has Room to Wait Before Gradually Lifting Borrowing Costs

Dow Jones
Aug 20

0907 GMT - The Riksbank has room to wait before hiking rates, as inflation is low, Handelsbanken senior economist Magnus Lindskog writes. Beyond consumer prices, subdued labor cost growth, supported by robust productivity gains, should also encourage the Riksbank to delay rate hikes until next year, Lindskog says. At the same time, the central bank must take higher global policy rates, particularly those of the ECB, into account to avoid a weaker krona fuelling imported inflation, he adds. "We maintain our view that the Riksbank will remain on hold through 2026 before gradually normalizing rates towards 2.25% in 2027, with a first hike in March." As the recovery gains traction and unemployment falls, inflation pressures should build, calling for a gradual return toward a neutral monetary policy stance, Lindskog says.

 

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