Interest rate hike in Sweden: The Central Bank of Sweden announces the largest increase in interest rates. here’s why
The bank justified the rise by noting that the average household was losing purchasing power, making it difficult for households to plan their finances.
The unexpected rise comes as the Federal Reserve System in the United States begins its two-day monetary policy meeting on Tuesday. Experts predict that the US Fed will announce a 75 basis point hike to trap higher prices. Despite the 100 basis point hike, the Riksbank is still 0.25% behind its inflation target, which could force the Swedish central bank to announce another hike in the next six months.
During the announcement, the central bank claimed that future inflation was difficult to predict and that it would continue to adjust monetary policy to bring inflation back to its original target.
The regulator also attributed the unpredictable inflation to strengthening economic activity in Sweden, the effects of covid-19 and the ongoing Russian-Ukrainian war. The country reported price inflation of 9% on August 19, the highest since 1991 and well above previous central bank estimates.
The aftermath of the lockdown period during the pandemic has dealt blows to markets around the world. However, the recent crisis in Eastern Europe has hit the West hard, especially NATO countries.
The resulting rise in prices has made life difficult for average households and SMEs. The Riksbank that households and businesses could face a significantly higher cost of living due to inflation remained at current levels.
Similar concerns were voiced by US Federal Reserve Chairman Jerome Powell. He recently said the economy would have to suffer a bit to avoid long-term damage from inflation. US inflation would have been around 8.52% in July, which was higher than the 12-month period ending August 31, 2022, which was 8.26%.
What is the inflation rate in Sweden?
Sweden reported a price inflation rate of 9%, the highest in the country since 1991.
What is Sweden’s target primary inflation rate?
Sweden’s primary inflation rate was 2%, about 0.25% lower than the current rate reached after Tuesday’s announcement.
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