Published January 8, 2022 at 11.00
Economics. The market believes that the US Federal Reserve will be forced to raise interest rates as early as March due to rampant inflation. This is shown by the ten-year market interest rate on US government securities, Bloomberg reports.
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Both consumer prices and wage levels are rising sharply in the US, while the return on US government securities pulls away at the highest rate of increase for a turn of the year in 20 years, writes Yahoo Finance.
The ten-year government bond now gives a return of 1.75 percent, which shows that the market assumes that the Fed will be forced to implement an interest rate hike earlier than planned, already in March.
– The Fed has shifted monetary policy focus from achieving full employment to to tackle inflation, says Rob Waldner, chief strategist for fixed income at Invesco, to Bloomberg.
– They will act and be more aggressive this year. We assume that the interest rate will increase and that the ten-year [interest rate on government bonds] can reach a little over 2 percent during the first quarter.
Robert Bergqvist, senior economist at SEB, tells Dagens industri that it is now there is a possibility that the Fed's support purchase of securities will end next month.
– In that case, it would open up for an interest rate increase as early as March. The market is already on that line, he states.
For Europe, such a scenario means that the ECB and also the Swedish Riksbank will be forced to implement interest rate increases, despite the fact that large groups of voters, especially in Sweden, are heavily invested in the sharply overvalued housing market.
Sweden's new role as a mortgage-driven economy has worsened during the pandemic, when more people had to borrow cheaply and when the former industrialized country changed course further towards a less production-focused and more speculative economy.
“Housing prices have continued to rise sharply and are still overvalued and household indebtedness, which mainly consists of mortgages, continues to increase “, the Swedish Financial Supervisory Authority stated in a letter to the European Systemic Risk Board ESRB in the autumn.
However, the Riksbank does not intend to follow its international sister authorities . According to the authority's so-called repo rate path, a first increase in the repo rate will not take place until the end of 2024.