Bank of Sweden raises rates by one percentage point to curb inflation


The Bank of Sweden (Sveriges Riksbank), the world’s oldest central bank, has decided to raise the country’s interest rates by one point, to 1.75%, with the aim of curbing inflation, which is ” too high”, as recognized by the body on Tuesday.

“Inflation is too high. It is sapping the purchasing power of households and making it more difficult for businesses and households to plan their finances. Monetary policy needs to be tightened further to bring inflation back on target,” the Riksbank said.

The central bank has explained that the causes of inflation are due to the balance between supply and demand arising from the pandemic, as well as the impact of the war in Ukraine on raw materials and energy markets.

The Bank of Sweden estimates that inflation will continue to grow in the remainder of the year after reaching 9% in August, the highest level in the last 30 years. Thus, the agency plans to continue raising rates in the next six months.

“There is considerable uncertainty about the evolution of inflation, and the Riksbank will adjust monetary policy as necessary to ensure that inflation returns to target,” the Swedish monetary authority stressed.

The entity has recognized that the higher cost of interest will affect the economy and that “many households” will have to face “significantly higher” costs of living. However, he has clarified that “it would be more painful” if inflation remained at its current high levels.

Regarding its economic forecasts, the entity already contemplates a stagflation scenario in 2023. The Riksbank has adjusted its GDP outlook downwards, so that it estimates a contraction of seven tenths in 2023, compared to the growth of seven tenths previously estimated . Regarding inflation, it has raised the forecasts for next year by 1.4 points, to 8.5%.

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