STOCKHOLM — Sweden’s central bank followed other central banks in raising its key interest rate in a major bid to tackle inflation, saying on Thursday that high prices were undermining people’s purchasing power and making it harder for households and companies to plan financially.
According to the Riksbanken, the three-quarters percentage point interest rate hike – the highest in 14 years, according to the Swedish news agency TT – served to reduce inflation and preserve the inflation target. Consumer prices rose by 9.3% in October compared to a year earlier, which is lower than the 9.7% in September.
With the increase, the benchmark rate in the European Union country that does not use the euro will rise to 2.5 percent, so it is not part of the decision-making process of the European Central Bank.
This comes as the ECB, the US Federal Reserve and other central banks have made similar big interest rate hikes to combat the inflation that has plagued people around the world.
In Sweden, the forecast “shows that the key interest rate is likely to be raised further at the beginning of next year, and then it will fall slightly below 3%,” the bank said.
“It is still difficult to assess how inflation will develop, and the Riksbank will adjust monetary policy as necessary in order to bring inflation back to the target within a reasonable time,” the bank said in a statement.
The decision on the governing interest rate shall be applied with effect from November 30.