STOCKHOLM (Reuters) – Sweden’s central bank (Riksbank) on Thursday raised its key interest rate by 25 basis points to 4.00 percent as expected and suggested it may have to raise the cost of credit further to bring inflation back towards its 2% target.
“Developments are certainly going in the right direction, but inflationary pressures in the Swedish economy are still too high,” the central bank wrote in its press release.
“Forecasts for the key rate indicate that it could be raised further,” adds the Riksbank, which has now increased the interest rate for the eighth time in a row in as many monetary policy meetings in order to curb inflation. which peaked at more than 10% in December 2022.
Inflation, however, slowed in August to 4.7% year-on-year but remains more than twice as high as the central bank’s target.
Analysts polled by Reuters had forecast a quarter-point hike in the Riksbank’s key rates. However, they are divided on the continuation of monetary tightening for the November meeting.
At the meeting in June, the Riksbank said it planned to raise its key interest rate at least once again this year.
It also announced its intention to cover part of its foreign exchange reserves by selling eight billion dollars and two billion euros against Swedish crowns, believing that the country’s currency is undervalued.
(Reporting Simon Johnson and Johan Ahlander; with Terje Solsvik; Claude Chendjou, edited by Blandine Hénault)
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