A general view of Stockholm, Sweden, May 8, 2017. -Reuters
Sweden's economy is slowing and the central bank will be forced to keep the benchmark interest rate at the current level of -0.25% for the next couple of years, the NIER think-tank said in a forecast on Wednesday.
Sweden has enjoyed years of strong growth, but the effects of a trade spat between the United States and China and worries over Brexit are finally having an impact and recent data points to a relatively rapid slowdown. "The Swedish economy has clearly entered a cooling down phase," Sweden's National Institute of Economic Research said. "Inflation will remain clearly below 2% and the Riksbank is therefore not expected to hike rates this year or next."
The NIER forecast growth would slow to 1.2% this year from 2.3% in 2018 and ease further in 2020. It saw inflation averaging 1.7% this year and 1.5% in 2020. The forecasts are much gloomier than the central bank's.
In early September, the Riksbank repeated its forecast of a rate hike late this year or early next and rate-setters have mainly stuck to that view since. But most analysts believe the central bank will be forced to change its mind.
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