Global Economy

Global rate-hike marathon may keep going in Nordics

Central banks in the US, euro zone and the UK are done raising interest rates for now, but their peers across Europe’s north aren’t so sure.

On Thursday, Sweden’s Riksbank could deliver yet another quarter-point salvo, taking its key rate to 4.25% to fight inflation or not, depending on who you listen to.

Economists and investors are divided on the outcome, with some arguing that Swedish officials may opt to expand asset sales instead, along with a signal that they may hike again early next year.

The split may very well extend to the Riksbank’s board, which has been unanimous on all but one rate decision since Erik Thedeen became governor in January.

Norway’s central bank the first in the Group of 10 major currency jurisdictions to start raising rates may take some comfort from declining expectations on price hikes as well as wage growth. Even so, more tightening is possible at its December 14 decision, not least after a recent acceleration of underlying inflation.

Compared with counterparts such as the Federal Reserve, the European Central Bank and the Bank of England, the Nordics are particularly focused on foreign-exchange pressures.Swedish policymakers have seen some of their work to rein in inflation undone by relentless krona weakening that makes imported goods more expensive. While the currency has strengthened recently, it remains vulnerable to deterioration.Similarly in Norway, it’s weakness in the krone, along with recent consumer-price data, that’s led some economists to revise calls from unchanged rates to an increase. “A December hike is fully on,” Nordea Bank Abp analysts Dane Cekov and Kjetil Olsen predicted recently.

One Nordic peer may keep rates on hold this week, but only because it’s done so much already. On Wednesday, Iceland’s central bank is anticipated in its own survey of market agents to keep the benchmark at 9.25%. That’s also the outcome predicted by two of the island’s biggest lenders, Landsbankinn and Islandsbanki.

Policymakers there were the first in the advanced world to start raising rates after the onset of the pandemic as early as May 2021.

Central-bank minutes in the US, euro zone and Australia, purchasing manager indexes across the advanced world, and a UK fiscal statement are among the highlights of the coming week.


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