Sweden’s Riksbank raises rates to 3.50%, says rate hike is almost done

Sweden’s central bank raised its policy rate by half a percentage point to 3.50% in line with market forecasts on Wednesday and said it was close to completing policy tightening.

With inflation near a 30-year high, central banks have raised interest rates aggressively in recent quarters. The pace of rate hikes has now slowed as rate-setters pay attention to turmoil in financial markets and slowing economies. But their work has yet to be done.

“Following rapid policy rate hikes over the past year, monetary policy has had a tightening effect on the economy and the Executive Committee assesses that after the April meeting there will be a range of key interest rate adjustments. policy in smaller steps,” the central bank said in the statement.

While the half-percentage increase was in line with forecasts, the market has cut expectations for the Riksbank policy rate to peak around 3.75% from near 4.0% before the recession. decision.

“Either the Riksbank knows more about inflation than we do, or they believe inflation will fall sharply in the second and third quarters,” said Lars Kristian Feste, head of fixed income at Ohman Fonder. .

Core inflation in Sweden – at 8.9% – has begun to ease, but is still well above the 2% target and there are concerns it could stay high for much longer. with current expectations.

The Swedish crown weakened after the announcement, an undesirable development for the central bank, which has complained that a weak crown has made its job against inflation more difficult.

The dovish tilt in policy was underscored by two out of five rate bookers voting for a smaller hike this time.

Deputy Governors Martin Floden and Anna Breman want a quarter point increase with the flexibility to increase more or less later this year.

The central bank said it will continue to focus on new data to determine upcoming policy, and uncertainty remains high.