Sweden’s Riksbank launched an interest rate hike of 100 basis points on Tuesday as it looks to curb inflation.
Mikael Sjoberg/Bloomberg via Getty Images
Sweden’s Riksbank launched a 100 basis point rate hike on Tuesday, taking the main key rate to 1.75%, as it warned that “inflation is too high.”[ads1];
In a statement, the central bank said that rising inflation “undermines households’ purchasing power and makes it more difficult for both businesses and households to plan their finances”.
The sharp increase comes as the U.S. central bank kicks off its two-day monetary policy meeting, with markets largely expecting a 75 basis point increase as policymakers strive to bring high prices under control.
The Riksbank said monetary policy needs to be further tightened to bring inflation back to the 2% target, and forecast further interest rate hikes over the next six months.
“Inflation going forward is still difficult to assess and the Riksbank will adjust monetary policy as necessary to ensure that inflation is brought back to the target,” it says.
Although global factors such as remaining imbalances after the Covid-19 pandemic and soaring energy prices due to Russia’s war in Ukraine have driven prices sky high, the Riksbank’s executive board said that strong economic activity in Sweden has also contributed.
Swedish consumer price growth rose to 9% annually in August, the highest level since 1991 and higher than the Riksbank’s previous forecast in June.
– Rising prices and higher interest costs are felt by households and businesses, and many households will have significantly higher living costs, said the Riksbank.
“However, it would be even more painful for households and the Swedish economy in general if inflation remained at today’s high levels.”
The comments echoed the recent line taken by Fed Chairman Jerome Powell, who said the US economy will have to face “some pain” to prevent inflation from causing more long-term damage.
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