Sweden's central bank raises interest rates, more to follow

Sweden's Riksbank raised interest rates yesterday. Bloomberg reports:

Sweden's central bank lifted its benchmark interest rate for the eighth time in 18 months and said it will raise it twice more this year as rising employment and slowing productivity growth threaten to fuel inflation. The krona surged the most in almost five years.

The repurchase rate was raised a quarter-point to 3.5 percent, the highest in more than four years, the Stockholm-based bank said in an e-mail today. The rate may be raised to "around" 4 percent by year-end, up from an earlier forecast of 3.5 percent, and to 4.4 percent in two years, the bank said.

The Bank of England is likely to raise rates soon too. Again from Bloomberg:

Bank of England policy makers defeated Governor Mervyn King's bid to raise interest rates this month, adding to speculation of an increase as soon as July.

Five of the Monetary Policy Committee's nine members overruled King with an unexpectedly slim majority, marking the second time in four years he has been outvoted as governor. King argued an increase was needed because of "upside" inflation risks, minutes of the June 6-7 meeting showed today.

Maybe the other members should have followed King's lead. May saw UK mortgage lending jump by 5.8 billion pounds, the largest amount in six months, while M4 rose by a monthly 1.2 percent and by 13.8 percent year-on-year.

Meanwhile, the Bank of Japan, is maintaining its gradualist policy. From Bloomberg:

The Bank of Japan's policy board retained its commitment to gradually raise the country's interest rates, the lowest among major economies, according to minutes published today in Tokyo.

Members agreed they would "adjust the level of interest rates gradually in accordance with improvements in the economic and price situation," according to minutes of the board's May 16-17 meeting. The bank has kept the key overnight lending rate on hold since doubling it to 0.5 percent in February...

Japanese manufacturers said they were pessimistic in the second quarter, a government survey showed today, signaling the Tankan may be "slightly softer," according to Richard Jerram, chief Japan economist at Macquarie Securities Ltd. in Tokyo.

Sentiment among large manufacturers fell to minus 2.2 points this quarter from 0.1 point in the previous three months, the Cabinet Office and Finance Ministry said. A negative number means pessimists outnumber optimists.