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Sweden Raises Key Interest Rate to 3.75 Percent: ‘Inflation is Still Far Too High’

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The bank on Thursday raised Sweden’s so-called policy rate by the expected 0.25 percentage points to 3.75 percent, saying it expected it to be increased at least one more time this year.

“Inflation is falling but is still far too high. New information, such as service prices rising unexpectedly rapidly and a weaker krona, indicates that inflation is declining more slowly than expected,” said the bank in a statement.

The Riksbank has a goal of keeping Sweden at an inflation rate of two percent per year (as measured with the CPIF, with mortgages removed from the equation), far lower than the current 6.7 percent.

Inflation fell in Sweden in May, but not by as much as experts had been hoping for.

Raising the interest rate is the main way the Riksbank tries to restrain inflation by cooling down the economy and discouraging spending.

“The high inflation is being felt by households with small margins in particular, but is also problematic for the economy as a whole,” said the bank, adding it was of “the utmost importance” to bring inflation back to the two percent target “within a reasonable period of time”.

The bank’s executive board also decided on Thursday to increase the pace of government bond sales from 3.5 billion kronor to 5 billion kronor a month, effective from September.

Source : Thelocal

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