Italy's assault on interest rates is unlikely in itself to prompt action by other central bankers; the country is in a state of deep financial and political crisis, with the lira, bonds and share prices in free fall. But the Swedish rise is undoubtedly a harbinger of things to come. With the economy only just beginning to ease out of its most serious recession in more than 50 years, an upward move in Swedish interest rates could hardly have been more unexpected.
Determined to nip any inflationary pressures in the bud, the Swedish authorities decided to take pre-emptive action and move early. Eddie George, the Governor of the Bank of England, would feel a lot more comfortable if we were doing the same thing in Britain, but so far other voices have prevailed.
Increasingly, however, it looks like an attempt to hold back the tide. With the Federal Reserve's open markets committee meeting next week to decide on a further rise in US interest rates, the time for action has arrived.Reuse content