Andreas Cervenka
Reporter and economic commentator
This is a commentary text. Analysis and positions are the writer's.
Updated 12.33 | Published 12.29
The Riksbank does not want to do more right now but is waiting for new statistics – even if it is cautiously opening up to interest rate cuts later on. The government is also waiting.
The Swedish economy is like a boat with a broken engine, where everyone is looking at each other and waiting for someone to do something.
Uncertainty. The word appears twenty-three times in the fourteen-page document entitled "Monetary policy update" that the Riksbank released in connection with today's decision that the interest rate will remain at 2.25 percent.
Other expressions that appear are "difficult to judge", "too early" and "wait".
This orgy of cautionary prose is of course due to the world economy under Donald Trump, where tariffs and various actions have turned most things upside down.
"It has created an unpredictability that has settled like a wet blanket over the world economy and also the Swedish one", said Riksbank Governor Erik Thedéen at today's press conference.
How the trade war will end is currently the subject of a global guessing game. The Riksbank refers, among other things, to a diagram that illustrates the uncertainty surrounding global trade policy.
It shows a curve that points straight up, with an uncertainty that is at least five times higher than previous record highs.
Call it the Trump factor.
Of course, no one knows exactly how it will hit Sweden's and the world's economy, but everything indicates that it is bad news.
President Donald Trump. Photo: Alex Brandon / AP
Recently, there have been more signals that the economy is slowing down – and it was barely moving before Trump got going.
Several banks have lowered their forecasts for GDP growth this year, now 2026 is set to be the year of recovery. However, it is not yet visible, with growth in the first quarter being zero.
The Riksbank is not giving any new forecasts but notes that Swedish households are depressed and that "anecdotal information indicates increased pessimism even among companies".
Many in real life are probably nodding in agreement.
In addition to several years of weak economic activity, many companies are struggling with deferred tax liabilities from the pandemic, which is now predicted to lead to a wave of bankruptcies.
In March, 122 restaurants went bankrupt, the highest figure ever recorded in a single month.
At the same time, unemployment is skyrocketing, rising to a full 8.8 percent in March, the highest since the financial crisis, apart from the pandemic.
Inflation then? It has also fallen back, after a food price shock at the beginning of the year. Preliminary figures yesterday showed that the consumer price index CPI rose by 0.3 percent in April. You have to go back to the pandemic to find such low figures.
According to the measure CPIF that the Riksbank looks at most, inflation was 2.3 percent. The fact that it is higher than the CPI is because the effects of the interest rate cuts of recent years are not taken into account.
(The fact that Sweden has two inflation measures that show two completely different things hardly helps to reduce uncertainty, but that is a fire figure for another day.)
An inflation rate of 2.3 percent is admittedly a little above the target of 2 percent, but the figure will fall, according to the Riksbank, not least because of the weak economy. The fact that the krona has strengthened is also good, because it dampens inflation.
Therefore, there may be talk of interest rate cuts in the future, or as it is said in Riksbank Swedish: "In that case, it could speak for a somewhat easier monetary policy in the future."
Several banks are now also predicting cuts later this year, Swedbank believes that the interest rate will fall to 1.75 percent in the autumn.
Why isn't the Riksbank cutting already now? Sweden is actually on its knees, a friend of order might ask. CPIF inflation is at the same level as at the end of 2018 when the interest rate was minus 0.5 percent.
Then we are back to that uncertainty. According to the Riksbank, it is "wise to wait for more information to get a clearer picture of the economic and inflation outlook".
In short, there is a fear that tariffs and trade wars could cause inflation to pick up again.
So we just have to wait.
The government has roughly the same attitude. When Finance Minister Elisabeth Svantesson gave her view of the economic situation the other week, she stated that it looks bleaker and that the government has “muscle to do more”. But only if the situation worsens.
The latest surveys by the National Institute of Economic Research show that households have become much more pessimistic just since February this year, both when it comes to their own finances and how Sweden is doing. More people are holding on to their money, more are waiting to make major purchases or buy a home, and unemployment is predicted to rise. For many, life is on hold.
After almost four bad years for the Swedish economy, it is starting to become a habit.
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