Swedish Central Bank Rate Hike
April 26, 2023
The Swedish Riksbank repo rate was raised by an as-expected half percentage point to a 14-1/2 year high of 3.5%. The rate had been has low as -0.5% prior to a hike in December 2019 and was at zero percent as recently as a year ago. Four increases later had lifted the repo rate to 2.5% by November, and today’s move follows a similarly-sized 50-bp increase two months ago. A statement explaining the action taken today laments that inflation is “still far too high and far from target” centered on 2%. Indeed, overall and core inflation currently stand at 10.6% and 8.0%, and the drop from peak mostly reflects energy. The statement goes on to say that a pair of 25-basis point rate hikes seem probable later this year in June and September. At the same time, the statement reveals that the decision to move the rate by 50 basis points was resisted by two executive committee members:
First Deputy Governor Anna Breman and Deputy Governor Martin Flodén entered reservations against the decision to raise the policy rate by 0.5 percentage points and against the forecast for the policy rate. They advocated an increase in the policy rate of 0.25 percentage points and an interest rate path that indicates a high probability of further increases in June and/or September. Against the backdrop of well-anchored inflation expectations, the moderate wage increases and the weak and downward-revised forecast for domestic demand, they argued that the monetary policy tightening should now proceed gradually to keep the door open for alternative courses of action later in the year, including a return to larger increases if inflationary pressures do not slow down sufficiently quickly.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Swedish Riksbank
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