The Swedish central bank announced on Thursday an increase in its key rate by 0.25 points, to 3.75%, which thus reached its highest level for nearly 15 years, in the hope of curbing persistent inflation.
Increases in the Riksbank’s key rate are having an effect, but for inflation to return to the 2% target within a reasonable timeframe, monetary policy needs to be tightened further, the central bank said in a statement.
This is the sixth time in a row that the central bank has raised its key rate.
The key rate should be raised at least once more this year, announced the Riksbank.
Inflation, which peaked at 12.3% year-on-year in December, the highest for more than 30 years, has since slowed to 10.5% in April and 9.7% in May.
An ebb mainly due to a very significant decline in energy prices, according to the bank.
The weak krone is also helping to keep inflation high, the Riksbank pointed out.
The Swedish krona depreciated sharply against other currencies over the past year, reaching historically low levels against the euro.
Despite the rise in rates, it weakened further on Thursday after the Riksbank’s announcement, briefly reaching a new all-time low against the euro, according to the financial daily Dagens Industri.
For the whole of 2023, the central bank expects Swedish GDP (gross domestic product) to contract by 0.5% and forecast inflation of 8.9%.