21 september 2022 | Macroeconomics | CEOs

Swedish interest rates rose by a full percentage point and they may be higher

As part of the fight against inflation, Sweden's central bank is raising interest rates. On Tuesday, they rose by a higher-than-expected full percentage point to 1.75%. The Swedish Central Bank has warned that interest rates will rise even more in the next six months.

In August, inflation reached 9%. This is the highest value in the last 30 years. The reason for this was a sharp increase in energy prices. Its effects have covered the economy and exceeded Riksbank's forecasts.

"When rates rise, it's obvious that interest costs for many households rise, but the cost of high inflation - sustained high inflation - actually rises even more," Governor Stefan Ingves told reporters.

Ingves added that raising rates now and in the future will help to reduce the risk of remaining at a high inflation level.

The inflation level at the moment in time is beyond the influence of the central bank. The desire of rate setters is that rising prices will not trigger higher wage demands, as the process of returning to the 2% inflation target level would become much more difficult in the long term.

Forecasts say Sweden's economy is heading for a sharp downturn, perhaps even a recession. But the rate increase will continue.

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