Sweden´s Riksbank jumps ahead of the pack and raises the Policy rate

The last time they took the lead in raising rates was in 2010-11. The stated reason was they were worried about high asset (house) prices.

Today, they “innovated”:

The Riksbank said that its decision follows an assessment that “the employment rate is historically high, companies are reporting major shortages of labor and cost pressures are rising.”

As the charts show, in 2010-11 the damage was big. Aggregate nominal spending (NGDP) was on the “road to Nirvana”, but the Riksbank raising rates aborted the process.

Note that currently, NGDP has flattened. Maybe the Riksbank wants it to come down a bit!

Reflecting the flattening of NGDP, the employment rate has lost steam, while the unemployment rate ticked up.

No matter where they operate, central bankers are proving to be quite incompetent!


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