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Unpicking Sweden’s labour data; DNB to cut again

The larger-than-expected increase in Swedish unemployment in July was not as bad as it first appeared given that it mainly reflected fewer summer jobs this year. While Sweden has not been immune from Covid, despite its light-touch lockdown, we expect it to be the best of a very bad bunch in Europe this year. Next week, we expect July surveys from Sweden and Switzerland to show that economic conditions continued to improve at the start of Q3.
David Oxley Senior Europe Economist
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Don’t bet against a 50bp Norges Bank hike in August

The Norges Bank intends to follow this week’s 50bp interest rate hike with a 25bp rate rise in August, but the combination of strong global inflation pressures, an incredibly tight labour market in Norway, and weak krone, could yet tip the balance towards another 50bp hike. It will be the Riksbank’s turn in the limelight next Thursday, and we expect it to join the Norges Bank, the SNB, and a host of other advanced central banks in the “50bp club”. Meanwhile, following the weakness of the euro-zone PMIs in June, the release of similar business surveys from Switzerland and the Nordics are also likely to make for worrying reading.

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Norges Bank joins the “50bp club”

This morning’s decision by the Norges Bank to raise its key policy rate by 50bps, to 1.25%, was in line with our non-consensus forecast. Also, as we predicted, the Bank all but confirmed that it will break with tradition and raise rates at the “interim” meeting in August, to 1.50%.

23 June 2022

More from David Oxley

Nordic & Swiss Data Response

Norway GDP (May) & Sweden GDP Indicator (May)

The larger-than-expected rise in mainland Norwegian GDP in May indicates that the economy is back in business following the lifting of restrictions, and it is likely to have regained its pre-virus level in June.

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The CBDCs are coming

We expect some major central banks to issue digital currencies later this decade, with those in countries where cash is rarest proceeding the fastest. The first generation of central bank digital currencies will be purposely designed not to shake up the status quo. But once established they would offer powerful new policy tools. It would be naïve to think that sooner or later central banks won’t consider using them.

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Löfven exits the stage (not pursued by a bear)

The resignation of Prime Minister Stefan Löfven in Sweden has added to the period of political uncertainty in Sweden. That said, the other leading political actors would probably struggle to pass muster in the Riksdag and so there is a good chance that Mr Löfven will return in the same role before long. Next week, we expect monthly GDP data from Norway to show that mainland activity gathered pace in May, and that core inflation remained below the Norges Bank’s target in June.

2 July 2021
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