Sweden: Riksbank raises interest rates by half a basis point

Sweden’s central bank has raised interest rates again by half a percentage point, raising the benchmark interest rate to 0.75% from 0.25% in a bid to tackle 30-year high inflation.

The rate hike, although expected by analysts, was Riksbank’s largest in more than two decades.

Rising prices from fuel to food have pushed up inflation following the pandemic and the Russian invasion of Ukraine, forcing the Riksbank to tighten its policy much earlier and much more aggressively than its members expected.

“The risk of high inflation stabilizing in prices and wage formation has increased,” the central bank said in a statement.

“The executive board predicts that the interest rate will rise further and will be close to 2% at the beginning of next year,” he added.

In February of this year, the Riksbank had predicted that there would be no change in the reference rate until 2024.

Analysts at Reuters expected a rise of half a point after inflation rose to 7.2% in May, with a further rise of 50 points in September, when the next meeting will take place.

Markets continue to see that the Riksbank will have to accelerate its tightening pace in the short term and continue to increase for a longer period of time.

The central bank’s goal is inflation at 2%.

The Riksbank is not the only one that wants to put aside growth concerns and focus on inflation.

The US Federal Reserve raised interest rates by 0.75% in its recent meeting and Norway by 50 basis points.

The ECB is set to raise interest rates in July for the first time in a decade, although the increase is expected to be 0.25%.