Sweden’s central bank stifled the country’s recovery from the financial crisis by raising its benchmark interest rate too quickly in the past year, Deputy Governor Lars E. O. Svensson said.
“The good Swedish development to a considerable extent may be explained by the financial market implementing much easier financial conditions than those consistent with the Riksbank’s policy-rate path,” he said today in a speech published on the Riksbank’s website. “Development would have been better with even easier policy and financial conditions.”
Svensson objected to all seven rate increases pushed through by a majority at the Stockholm-based bank from July 2010 to July this year. When the bank halted its tightening cycle this month, he voted against the majority’s view of future increases, saying rates should be kept unchanged at 2 percent until the middle of 2013.
Finance Minister Anders Borg slashed the government’s economic and budget forecasts on Aug. 26, saying the largest Nordic economy, which relies on exports for half its output, will grow 1.3 percent instead of 3.8 percent next year. The economy will expand 4.1 percent this year, after growing 5.7 percent in 2010, the most in the European Union.
Four of the Riksbank’s six board makers this month signaled they may vote to raise the rate next quarter. The bank also forecasts a rate of 3 percent in the third quarter of 2013.