Interest Rate Hike in Sweden and South Africa

November 24, 2022

The Swedish Riksbank’s repo rate was increased today by 75 basis points to 2.5%, and another increase early in 2023 is also anticipated. Even before the pandemic’s onset, Riksbank officials had experimented with a negative interest rate of as much as -0.50% until a pairĀ  of 25-basis point hikes in December 2018 and December 2019. The rate was kept at zero percent until April 2022, when a 25-basis point hike was engineered. This was hurriedly followed by hikes of 50 bps in June, 100 bps in September and now 75 basis points, but officials released a statement that readily admits that inflationary pressures have evolved and endured more aggressively than they were expecting to 9.3%, well over target.

At the South Africa Reserve Bank, another 75-basis point repo rate hike was announced, same as the size of the prior two increases done in July and September. Monetary tightening began a year ago in November 2021 from a pandemic low of 3.50% and has now doubled to 7.0%. Both that level and CPI inflation of 7.6% currently lie above the central bank’s 3-6% medium-term inflation target. In taking today’s action, officials revised projected economic growth a bit lower and again raised the expected future path that they envision for inflation.

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

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