Published 9 April 2023 at 09.09
Economics. When Riksbank governor Erik Thedéen opened up about scrapping the inflation target and leaving the interest rate unchanged in April, he kicked off the financial part of the Swedish economy – and with a message. Record holiday home prices from 2021 remain unchanged and the stock market is now moving upwards again, seemingly unaffected by inflation.
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Scraped the inflation target
- The Riksbank opens to ignore raising the interest rate
© SVT
NEW GIV: Erik Thedéen opens up about abandoning the inflation target in an Agenda interview on 26 March 2023.
It was at the end of March that the governor of the Riksbank came out and opened up about abandoning the inflation target. He told SVT's “Agenda” that he does not rule out that the policy rate is left unchanged at the next meeting of the Riksbank Executive Board in April, or that it is only raised by a symbolic 0.25 percent.
There are still just over two weeks until the interest rate announcement on April 26, but the statement in the Agenda is already being interpreted as the Riksbank having completely abandoned the so-called inflation target.
This is because Sweden at the time had CPI inflation of 12 percent and an interest rate of just 3 percent – far below what is required to affect very high inflation of that kind.
Abandoning the inflation target is bad news for wage earners and consumers. But it is brilliant news for those who own financial assets.
Since the Riksbank Governor's statement, the Stockholm Stock Exchange's broad index OMXSPI has risen from 794 to 842 points.
At the same time, it is now clear that the prices of housing is again increasing throughout Sweden, as more people look forward to easier and simpler opportunities to borrow.
Dagens Industri euphorically reports that prices for holiday homes look set to remain at record levels in 2021 during the Easter weekend, when “viewings kick off on serious”.
However, assessors believe that there may be fewer deals than usual, despite the authority's hint that interest rates will be low regardless of inflation.