Economist Warns of Potential Interest Rate Hikes Amid Government Stimulus in Sweden

A leading economist has raised concerns about the possibility of interest rate increases in Sweden following the government's announcement of substantial financial aid to households. This support, while beneficial in the short term, may lead to inflationary pressures in the economy. The economist described this as a 'Ketchup effect,' where a sudden surge in economic activity could necessitate higher interest rates to control inflation.

In financial markets, major players like Citi and Pareto have cut their target prices for the real estate platform Hemnet by about one third, reflecting challenges in the sector. Pareto warned of a potential shock in the fourth quarter but also noted that conditions are ideal for Hemnet's recovery.

These developments highlight a complex economic situation in Sweden, with government stimulus potentially fueling inflation risks that might prompt the central bank to raise rates, while key companies face market pressures.

The economist's warning underscores the delicate balance policymakers face between supporting households and maintaining economic stability. Meanwhile, financial institutions advise caution but remain hopeful about future recoveries in certain markets.