Sweden’s Riksbank Is Criticized for Missing Its Chance to Hike

(Bloomberg) -- As policy makers at the Swedish central bank meet to discuss their next interest rate decision, they're already fielding criticism for failing to tighten policy when they had the chance.

The Riksbank last hiked rates in December, bringing the benchmark repo rate to minus 0.25%. Though policy makers have signaled more is to come, recent dovish signals from the U.S. Federal Reserve and the European Central Bank make tightening in Sweden more challenging.

“We're seeing the cycle weakening, so I think it's going to be difficult for the Riksbank to raise the rate, especially when the ECB and the Fed are adding fuel,” said Klas Tikkanen, the chief operating officer of Nordic Capital.

“We have lost our chance to hike interest rates,” he said in an interview on Tuesday. “We should have done it earlier when the economy was more stable and had a different outlook, maybe two-to-three years ago.”

The comments come as the Riksbank meets to discuss its next rate announcement, due on Wednesday. All economists surveyed by Bloomberg expect the bank to keep the repo rate at minus 0.25%, though some expect policy makers to show caution in their forward guidance as the world's major central banks embrace continued stimulus.

The concern is that central bankers who have held on to expansionary policies well after the last crisis may not have enough ammunition in their toolboxes to tackle the next downturn. The Riksbank has signaled it will raise rates again toward the end of the year, but could backtrack amid a less certain global backdrop.

In Sweden, negative interest rates have coincided with a much weaker krona. Since early 2015, when Swedish rates first dropped below zero, the currency has lost about 12% against the euro.

That currency development is “problematic” for Sweden, Tikkanen said.

To contact the reporter on this story: Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net;Jonas Bergman at jbergman@bloomberg.net

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