Sweden's central bank still expects to hike rates by a quarter or half percentage point in April, but market turbulence in the United States means incoming data will be decisive for policy, Riksbank Governor Erik Thedeen said on Tuesday. The sudden collapse of Silicon Valley Bank and Signature Bank
pressured global bank stocks further on Tuesday, following sharp losses on Monday, as investors fretted over the financial health of some lenders, despite assurances from U.S. President Joe Biden and other policymakers.
The developments have ratcheted up uncertainty about how
monetary policy will now develop worldwide.
"We are following developments in the financial markets, and
we currently consider there to be no risk to financial stability
in Sweden," Thedeen said in a statement before giving testimony
to parliament's finance committee.
"At the same time, it is not unusual for turbulence in
foreign capital markets to spill over into Sweden. We are
therefore closely monitoring the situation and, as always, we
are prepared to take action in the event of a rapid change."
Thedeen said the impact might be felt in higher borrowing
costs for companies or weaker developments in the stock market
and across the wider economy.
It is too early to tell what effect the turbulence will
have on monetary policy, he added.
"A few weeks ago, many though we would need to hike (rates) more because incoming data pointed in that direction," Thedeen later told reporters after giving his testimony.
"Now many believe we need to hike less. My conclusion is that it is very sensible to continue to look at the incoming data and make a decision (on monetary policy) at the end of April," he added.
Inflation figures for February are due on Wednesday.
After the collapse of SVB and Signature Bank, markets have been re-pricing the monetary policy outlook across the globe, reckoning on fewer rate hikes.
Markets had been pricing in a peak in the Swedish policy rate at around 4.1%.Now the peak is seen at roughly 3.6%. (Reporting by Terje Solsvik and Simon Johnson, editing by Essi Lehto and Gareth Jones)
