Surprise Rate Hike in Sweden is First Increase since December 2019

April 28, 2022

The Swedish Riksbank announced a dramatic shift in its policy. The repo rate was raised from zero percent to 0.25%, defying a promise made as recently as the prior meeting in February not to raise such until well into 2024. Large global uncertainties and rapidly rising CPI inflation across a broad front forced this change of heart that also includes forward guidance suggesting a front-loaded tightening that will lift the repo rate by almost a percentage point additionally over the coming year and to 1.8% by 2025. A released statement also announced an end to T-bill purchases by next month and a plan of balance sheet reduction through less than full reinvestment of maturing bond holdings. CPI inflation is now projected at 6.0% this year, double the prior forecast, 5.0% in 2023, 2.8% in 2024 and 2.3% in 2025.

From a low of -0.50%, Sweden’s central bank interest rate benchmark had been raised 25 basis points in December 2018 and by an additional 25 basis points one year later.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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