Riksbank raises its policy rate to 2% and says further hikes are likely next year
Victoria Shinder1 min readSweden's Riksbank raised its policy rate by 0.25 percentage points to 2 per cent on 4 November. The decision applies from 11 November, and the minutes of the Executive Board's meeting are due on 10 November.
The bank's reasoning starts abroad. Global inflationary pressures remain elevated because of supply disruptions linked to the war in the Middle East, energy prices have risen further and inflation in other countries has increased. In Sweden, CPIF inflation was 1.5 per cent in September, in line with the Riksbank's forecast, but held back by direct effects of temporary fiscal measures; excluding them it was 3 per cent. The measure the bank considers the best guide to underlying inflation, which also excludes energy, was 1.6 per cent, slightly below expectations.
Economic conditions are strengthening and are expected to become normal next year, with the labour market improving. The combination of stronger activity, cost increases from supply disruptions and a weaker krona this year is expected to lift both CPIF and underlying inflation above 2 per cent next year. If that outlook holds, the Riksbank says a further rise in the policy rate is likely in the coming year, in line with its September forecast, and inflation should then stabilise around the 2 per cent target.
The bank lists risks in both directions: persistent supply disruptions and faster growth on one side, and uncertainty about the labour-market recovery, geopolitics, concerns about AI investment and weak public finances in some countries on the other.
What it means
The Riksbank is hiking while its own preferred underlying measure is below target, on the forecast rather than the print. A weaker krona is doing part of the inflation work it wants to lean against.