The Riksbank presents yet another major increase in the key interest rate

Most recently, two months ago, the Riksbank raised the key interest rate by 1 percentage point – that was it the largest increase in almost 30 years and an attempt to counter rising prices and increased rates of inflation. Now there was another increase, just like in many other countries recently.

Stefan Ingves says that the price increases in Sweden right now are the highest since the beginning of the 1990s.

– The companies plan to continue raising prices if you look at the companies’ price plans, says Ingves.

– To protect the inflation target, we are raising the interest rate by 0.75 percentage points to 2.5 percent. The most likely thing is that the interest rate needs to be raised further at the beginning of next year to stay somewhere close to 3 percent in the coming years. But there is a great deal of uncertainty surrounding the inflation trend, and the interest rate path is a forecast and not a promise.

High risk of high inflation taking hold

Inflation has been at record high levels during the year. The inflation rate according to CPIF was 9.3 percent in October, which was a decline from September when the inflation rate was 9.7 percent. The monthly change from September to October was -0.1 percent. But many analysts believe in continued increased inflation during the winter. The Riksbank believes that inflation will fall back in the next year.

– This does not mean that prices need to fall, it is enough that prices rise at a slower pace, says Ingves.

SVT’s economic commentator: Still low interest rate

Historically speaking, despite today’s increase, the policy rate is still very low, notes SVT’s economic commentator Alexander Norén.

– And the real interest rate, i.e. the interest rate minus inflation, is still negative.

Today’s interest rate announcement was the last with Stefan Ingves as governor of the Riksbank. At the turn of the year, Erik Thedéen, outgoing head of the Financial Supervisory Authority (FI), over. The next interest rate announcement will come on February 9.

The Stockholm Stock Exchange turns up during the morning following the Riksbank’s announcement. The broad OMXS index was up just under 0.3 percent at 10:30 a.m.

Javascript must be enabled to play video

How does the repo rate actually work? Savings economist Joakim Bornold clears up question marks in the interest rate jungle. Photo: SVT & TT

Leave a Comment