Interest rates up in Sweden

The Swedish central bank has predicted that that the economy in Sweden will grow by 3.7 percent in 2006 and that consumer price inflation would reach 1.5 percent. The Swedish economy has been experiencing strong growth in both domestic and exports sectors. In consequence of these forecasts, the Riksbank raised interest rates by 25 basis points on Tuesday to 2.25 percent. In the statement that came with news of the raise, the Bank indicated that further hikes in interest rates would likely come in similar increments at their August, October, and December meetings.

If these indications turn out to be accurate interest rates in Sweden could be at 3 percent by the end of 2006. The comments also implied that rates could rise as high as 3.5 percent next year. The Bank is determined to keep inflation within 1 percent of its stated target of 2 percent for the next “couple of years”.

Analysts said that the Bank was concerned about higher household debt and rising prices for homes. It its statement, the Bank acknowledged these concerns, but said that inflation is being moderated by smaller rises in the price of imported items. The Bank’s statement on these issues takes on more importance in light of national elections that are scheduled for September, especially since polls show that the nation’s voters are currently evenly split between support for the current government and its conservative opponents.

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