Sweden’s Riksbank raises interest rates

The Swedish central bank, Riksbanken, has decided to raise the repo rate by 0.25 percentage points to 2.0 per cent, the bank announced on Tuesday.

The intent is to stabilise inflation around the target of 2 per cent and resource utilisation around a normal level. The forecast for the repo rate is so far held unchanged.

Two of the Riksbank’s deputy governors, Karolina Ekholm and Lars E.O. Svensson entered a reservation yet again against the decision to raise the repo rate and against the repo rate path of the Monetary Policy Report.

The two deputy governors, who chose to enter a reservation against the Riksbank’s decisions to raise rates in April, preferred a repo rate equal to 1.75 per cent and a repo rate path that first rises slowly to 2 per cent in the third quarter of 2012 and then rises faster to about 3.8 per cent by the end of the forecast period.

This is motivated by their assessment that the Report’s forecasts of foreign policy rates and Swedish resource utilization are both too high.

Their repo rate path would imply CPIF inflation closer to 2 per cent and a faster reduction of unemployment towards a longer-run sustainable rate.

The minutes from the Executive Board’s monetary policy discussion will be published on 18 July 2011. The decision on the repo rate will apply with effect from 6 July

“This decision was expected, it is a raise and an unchanged repo rate path. And two entered a reservation, just like last time,” said Tor Borg, analyst at Swedish bank SBAB to news agency TT.

Member comments

Become a Member to leave a comment.Or login here.