Graph of the week: Sweden is risking a monetary accident

The Swedish economy is one of the strongest growers in Europe at the moment. Nevertheless, this week the Swedish Riksbank decided to cut its policy rate further to -0.50%. The question of whether or not the Riksbank is going too far is becoming more and more relevant.

Swe GDP

Sweden has made a decent recovery from the crisis. Economic activity is 8.6% above its pre-crisis level and is growing at close to 4% at the moment. Moreover, leading indicators suggest that growth of 6% is a possibility in the near future. On top of that, the Swedish housing market is booming. House prices have doubled in the past 10 years, are currently rising at a pace of more than 10% a year, and that pace is still increasing.

As a central bank injects monetary stimulus, there is always a risk that the stimulus feeds bubbles, among other things in housing markets. Of all the countries where central banks have been pushing the monetary needle, Sweden is probably closest to such a monetary accident.



This article was written by Bart Van Craeynest

on 12 February, 2016

On completion of his studies in economics at UFSIA, Bart Van Craeynest started work as an economist in the financial sector. In this capacity he has been following economic developments in Belgium and internationally and the impact of the latter on the financial markets for over 15 years. Following a long period at a large bank, he became chief economist at a Belgian financial institution in 2010. Bart Van Craeynest has held the position of chief economist at Econopolis since 2015. He is co-responsible for the economic line of the house and hence closely involved in developing the investment strategy.