COST OF LIVING
The inflationary pressure seems to be easing. But the central banks in the Western world aim to implement interest rate increases for a while longer.
Published: 29 January 2023 10:08 CET
Next week, interest rate increases are expected from the Federal Reserve System (FED), the European Central Bank (ECB), and the Bank of England – and the Swedish Central Bank (Riksbank) is expected to follow suit.
Signs that the unusually high inflation in the United States is beginning to moderate means that the American central bank, the FED, is now expected to slow down the pace of interest rate increases.
The first interest rate announcement of the year from FED chief Jerome Powell and his board on Wednesday is, according to the average forecast among analysts, expected to amount to an increase of 0.25 percentage points – to a total of 4.50-4.75.
Eight raises in a row
If that turns out to be the case, the FED will have raised interest rates at eight meetings in a row. As recently as December, it was adjusted up 0.50 to a 15-year high – following a historic streak of three consecutive rate meetings with 0.75 percentage point hikes.
In order to end interest rate hikes, Powell wants, among other things, to see more reactions in the economy, especially when it comes to the labour market in the United States.
The ECB and its chief, Christine Lagarde, have put a lot of effort into sounding hawkish in the runup to the interest rate announcement on Thursday. Among other things, they stated that there might be several increases of 0.50 percentage points this year.
This is also the average forecast for their colleagues at the Bank of England in London, which are also expected to announce that they will raise the policy rate by 0.50 points on Thursday.
Increase expected in Denmark
On Thursday, February 9, Erik Thedéen’s first interest rate meeting at the Riksbank since he took over as Riksbank governor at the turn of the year will take place.
Most analysts expect an increase in the policy rate of 0.50 points.
“The journey to the Riksbank’s two percent target is long,” Handelsbanken’s chief economist Christina Nyman noted when she presented a new economic forecast this week.
Her main scenario is another increase from the Riksbank in April to a key interest rate of 3.25 before there is a pause in interest rate increases.
Nordea’s economists also expect 3.25 to be the peak in the interest rate cycle we are in now. But their colleagues at Swedbank believe that, on top of this, there will be another increase in the policy rate this summer, to 3.50.