Sweden’s Riksbank launched a 100 basis point rate hike on Tuesday to curb inflation.
Mikael Sjoberg/Bloomberg via Getty Images
Sweden’s Riksbank launched a 100 basis point rate hike on Tuesday, bringing its key policy rate to 1.75%, as it warned that “inflation is too high”.
In a statement, the central bank said rising inflation is “undermining household purchasing power and making it more difficult for both businesses and households to plan their finances”.
The soaring comes as the US Federal Reserve begins its two-day monetary policy meeting, with markets expecting an overall increase of 75 basis points as policymakers aim to contain rising prices.
The Riksbank said monetary policy needs to be tightened further to bring inflation back to the 2% target, and forecast further increases in interest rates over the next six months.
“The evolution of inflation in the future is still difficult to assess and the Riksbank will adjust monetary policy if necessary to ensure that inflation is brought back to target,” he said.
While global factors such as remaining imbalances after the Covid-19 pandemic and rising energy prices due to Russia’s war in Ukraine have pushed prices up, Riksbank’s board of directors said strong economic activity in Sweden also contributed.
Swedish consumer price inflation rose to 9% a year in August, the highest level since 1991 and higher than the Riksbank’s earlier forecast in June.
“Rising prices and higher interest charges are being felt by households and businesses, and many households will have significantly higher living costs,” the Riksbank said.
“However, it would be even more painful for households and the Swedish economy in general if inflation were to remain at the current high level.”
The comments echoed the recent line of Fed Chair Jerome Powell, who said the US economy will have to endure “some pain” to prevent inflation from wreaking more havoc in the long run.
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