Sweden: The Riksbank delivers largest rate hike in over two decades in June
June 29, 2022
At its meeting on 29 June, the Riksbank raised its key repo rate by 50 basis points, bringing it to 0.75% from 6 July. The decision, which was widely priced in by markets, marked the largest hike in over two decades. Meanwhile, the Riksbank confirmed it will slow the rate of asset purchasing more quickly than estimated in April, and is now set to acquire SEK 18.5 billion (around USD 1.8 billion) of bonds in H2—instead of the SEK 37.0 billion previously estimated.
The move was driven by the Riksbank’s commitment to rein in inflation. The Bank expects inflation to remain above 7.0% for the remainder of 2022, and the risk that it becomes entrenched in price setting and wage formation has increased since its last meeting.
With regard to forward guidance, the Riksbank’s tone turned more hawkish in its communiqué. It stated it had upwardly revised the policy rate forecast since April, and sees the repo rate at around 2.00% in early 2023—instead of April’s forecast of mid-2025. In line with this, the majority of our panelists see the repo rate ending this year at 1.50%.
The next monetary policy meeting is scheduled for 19 September.
Author: Marta Casanovas , Economist