The Nordic and Swiss economies’ reasonable economic performance, low public debt and stable political backdrop should help to maintain their safe haven status. But there will be some marked economic and policy divergences. Slow growth and low inflation in Switzerland and Norway look set to force the central banks there to maintain extremely supportive monetary policy stances for the foreseeable future. But we believe that a tight labour market and rising inflation will prompt Sweden’s Riksbank to raise interest rates sooner and faster than markets anticipate. This implies that Sweden’s currency and bond yields will rise against their equivalents in the euro-zone, Norway and Switzerland in 2018.
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