High inflation makes Sweden hike key interest rate one full percentage point

AFP , AP , Tuesday 20 Sep 2022

Sweden's central bank on Tuesday raised its key interest rate by a full percentage point to 1.75 percent, saying inflation is "too high'' and "is undermining households' purchasing power and making it more difficult for both companies and households to plan their finances.''

File photo showing Stefan Ingves, Governor of Swedish National Bank (Sveriges Riksbank). Photo courtesy of Bloomberg

Riksbanken said that inflation has risen rapidly, the rate for August was 9.0 percent, and "to bring down the high rate of price increase, central banks worldwide have raised their policy rates at a rapid pace.''

It said that "during the pandemic, global imbalances arose between supply and demand. Russia's war in Ukraine has pushed up prices even further on several important commodities and created serious disruptions on the energy markets in Europe, which has caused electricity and gas prices to rise to very high levels.''

It added that "the good economic activity in Sweden has also contributed.''

Riksbanken said the policy rate will continue to be raised over the next six months as it tries to bring inflation back to target levels.

Sweden is part of the European Union but does not use the euro, so it is not part of European Central Bank.