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Sweden Monetary Policy February 2023

Sweden: Riksbank continues to slow pace of tightening in February, brings the policy rate to over 14-year high

At its first scheduled meeting of the year on 8 February, the Riksbank delivered another rate hike. The 50 basis point increase brought the policy rate to 3.00%—the highest level since November 2008. The move, which markets had largely priced in, came on the heels of September and November’s 100 and 75 basis points hikes, respectively, as the Riksbank continued to slow the pace of the tightening cycle.

The decision to hike rates further was driven by the continued acceleration of consumer price inflation with a fixed interest rate (CPIF) through December, which surprised the Riksbank on the upside. The Riksbank now sees CPIF at 5.5% in 2023 (previously: 5.7%). Nonetheless, the bank sees inflation moderating this year and expects it to stabilize around the 2.0% target in 2024. However, the 2024 CPIF forecast has also been upwardly revised, to 1.9% from 1.5%. The Riksbank also announced it would reduce its asset holding at a quicker pace; from April, it intends to sell SEK 3 billion and SEK 0.5 billion of nominal and real government bonds, respectively, each month until further notice.

With regard to forward guidance, the Bank noted that it is uncertain as to whether inflation would drop “sufficiently quickly and far, not least given the fact that underlying inflation is still rising”. Hence, the Riksbank suggested in its communiqué that it would hike the rate again in spring. As in previous meetings, the Bank will continue to adapt its policy according to the evolution of inflation.

The next monetary policy meeting is scheduled for 25 April, with the decision to be announced the following day.

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