The article continues below the ad
Sweden’s central bank, the Riksbank, raised the key interest rate to 3.75 percent on Thursday morning. In advance, a rise of 0.25 percentage points was expected, according to estimates obtained by Bloomberg.
The Riksbank estimates that it will raise interest rates once more this year. The central bank has also decided to increase the rate of government bond sales from SEK 3.5 billion to SEK five billion per month from September this year.
Today’s interest rate hike is the seventh in a row from the Riksbank, which many agree started late with monetary policy tightening when inflation in the neighboring country really started to bite last year.
The key interest rate in Sweden is at its highest in over 15 years.
Economists expect two rate hikes this year
Today’s interest rate announcement is Erik Thedéen’s third as governor of the central bank, after Stefan Ingves resigned at the end of his term at the turn of the year. Thedéen and the monetary policy committee point out that inflation is still well above the two percent target, and that the Swedish krona can help keep inflation up.
The article continues below the ad
– There is a risk that the krone’s influence on price increases is greater in the current situation of high inflation, the press release states.
The Swedish krone made a small jump shortly after the interest rate announcement, but the krone quickly fell back to its starting point. At 09.45, 100 Swedish kroner cost 100.16 Norwegian kroner.
Chief economist Marius Gonsholt Hov at Handelsbanken Capital Markets writes in Thursday’s morning report that the inflation figures from last month did not contribute to increasing pressure on the Riksbank, but that the Swedish real economy has again shown more resilience than previously thought.
– Other central banks have delivered a series of hawkish interest rate announcements recently, and the weak Swedish krone is a constant headache for the Riksbank. Ergo, the interest rate continues to rise today, and our Swedish analysts also believe that the interest rate will be raised further in both September and November, to 4.25 per cent, he writes further.
He adds that the immediate weakening must be seen in light of the fact that there was a tail risk for a double hike.
Ahead of today’s interest rate announcement, it was not completely ruled out that there would be a double hike, as the Riksbank did at the previous interest rate meeting in April.
Declining price growth
Price growth in Sweden from May 2022 to May this year ended at 9.7 per cent, after an annual rate of 10.5 per cent in April. From April to May, prices rose by 0.3 per cent.
The article continues below the ad
May was thus the third month in a row where price growth moderated on an annual basis.
In Sweden, consumer prices are measured slightly differently than here at home. Since 2008, SCB has operated with KPIF, or CPI with a fixed interest rate, which removes the effect of changing interest rates, but still takes into account changes in energy prices. CPIF replaced CPI as the target variable for the Swedish central bank’s inflation target in autumn 2017, and has been included in SCB’s official statistics since 2018.
The article continues below the ad
CPIF, price growth with a fixed interest rate, rose 6.7 per cent on an annual basis in May.
SCB also has a consumer price index with a fixed interest rate, but which excludes changes in energy prices, CPIF excluded for energy. This is thus more similar to what we here at home associate with core inflation and, with today’s high energy prices, will give a better expression of underlying price changes.
CPIF excluding energy ended in May at 8.2 per cent on an annual basis, down from 8.4 per cent in April. (Terms) Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links, which lead directly to our pages. Copying or other forms of use of all or part of the content may only take place with written permission or as permitted by law. For further terms see here.
2023-06-29 07:32:17
#Swedens #central #bank #raises #key #interest #rate
