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 came yet another increase.

– Some thought that there would be an increase of 1 percentage point because we have not overcome inflation in Sweden yet. Some believed in 0.5 percentage point. An increase in between is a way of showing that you continue on the set path but do not intend to shock, says SVT’s economic commentator Alexander Norén.

High risk of high inflation taking hold

Inflation has been at record high levels during the year. During October, the inflation rate fell from 9.7 to 9.3 percent according to CPIF. But many analysts believe in continued increased inflation during the winter, and there will probably be further increases in the interest rate in the future. The Riksbank expects the policy rate to be just under 3 percent at the beginning of next year and remain there until 2025.

“The risk of today’s high inflation taking hold is still great and it is of the utmost importance that monetary policy works so that inflation falls back and stabilizes around the target of 2 percent within a reasonable time”, writes the Riksbank in a press release.

– The Riksbank believes that the interest rate will be higher next year than previously thought, they have been a little more cautious in the past, says Alexander Norén.

– It was a little more aggressive than expected, says Nordea’s chief economist Annika Winsth to TT.

Historically, however, the interest rate is still very low, notes Alexander Norén.

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

Ingve’s last message

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.

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

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