Sweden’s central bank 100bp rate hike overnight

Sweden’s Riksbank has hiked rates by 100bp taking the repo rate to 1.75% – the biggest hike ever since the initial introduction of inflation targets.

ING had a rundown hitting the main points:

  • decision to hike by 1% was unanimous
  • prompted by the highest level of CPIF inflation since 1991 and the negative implication it could have on the upcoming wage negotiation which will lock in pay growth for the next three years.
  • Looking at officials’ new interest rate projections, they are signalling a further 25bp hike at the November meeting and that rates will be around 2.50% in mid-2023.
  • It looks like, as of now, with uncertainties regarding inflation remaining high throughout the winter, the bank accepts the housing market slowdown in the medium-short term, prioritising bringing down long-term inflation risk instead.
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