"Has the inflation scare played out its purpose?"

To raise

"The inflation scare"

Inflation, although it seems to have passed its peak and started to decline, remains very high. Way over the mark. If you let go of the reins now, there is a risk that it will start galloping away again.

It's all about psychology. If the Riksbank continues to show a tough attitude to the fight against inflation by continuing to raise interest rates and with its interest rate forecast is frightened that it will continue to keep it high, it will bring down consumption, reduce demand and thus bring down inflation. They want to see a clear and steady downward trend in order to dare to change course, otherwise inflation risks being stuck at a high level.

"We must follow the rate hike race"

When the European and US central banks hike, the Riksbank feels compelled to follow suit to prevent the krona from weakening (investors move their money to currencies where interest rates are higher). If the krona is weak, we will have more inflation, because a large part of our imports are paid for in increasingly expensive euros and dollars. That's why we have to do like the big boys, we're too small to run our own race.

Towards raising

"The inflation scare fools no one"

Critics say it has served its purpose. If it was even useful from the beginning. Inflation did not start because we consumed too much, inflation came from outside and you cannot scare Vladimir Putin with Erik Thedéen.

And while what started the inflation bonfire — Russia's war on Ukraine and lingering problems from the pandemic in the production and distribution of goods — has now become a self-spreading fire through the economy, it has already begun to lose momentum due to lack of oxygen. After all, energy is now becoming cheaper, the price of raw materials for food is falling. This will eventually break through in the stores so prices stop rising by themselves. If only the Riksbank has a little patience, the problem will be solved when the same external factors that started the fire now work in the opposite direction.

"We don't need to follow the interest rate hike race"

We are more sensitive to interest rates than most other European countries, interest rate hikes are biting us harder in Sweden. Swedish households are among the most indebted in Europe. And Swedes also have more short-term loans, variable, than in most other countries. So interest rate hikes are being noticed more quickly here.

Therefore, we should not follow John and do just like the European Central Bank when it hikes. It is an unnecessary act of self-harm that we must stop. It risks causing a worse recession than we could get away with.

Most exciting is the forecast

In other words, two strong reasons for continuing to raise significantly, and two strong reasons against.

At 9.30 we find out which bird they have listened to this time. The hawk who wants to raise, or the dove who wants to slow the pace of interest rate hikes.

But the interesting thing is not in today's, expected, increase. What is exciting is the Riksbank's forecast – what they would have us believe – about its future interest rate decisions.