Sweden's central bank leaves interest rate unchanged

The Local Sweden
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Sweden's central bank leaves interest rate unchanged
The head of Sweden's Riksbank, Erik Thedéen. Photo: Jonas Ekströmer/TT

The Swedish Riksbank on Thursday broke a streak of eight consecutive rate hikes, leaving the interest rate unchanged amid weakening inflation.


"Inflation is still too high and there are still risks that it will not continue falling fast enough and stabilise at the target. But inflation has fallen and inflationary pressures have clearly eased," said the bank as it announced its decision to leave the interest rate at four percent.

It warned, however, that further rate hikes are still an option for next year if inflation doesn't fall fast enough.

"Prices for services are increasing at a rapid pace and contributing significantly to total inflation. In addition, the krona is still unjustifiably weak, which is holding up the rate of price increase for goods," read the Riksbank's statement.

Experts had been torn on whether the Riksbank would raise the rate as it advertised after its last meeting in September, but most agreed that the likelihood of leaving it unchanged increased after the European Central Bank and the US Federal Reserve both held steady.


Inflation measured according to CPIF – the consumer price index with mortgages taken out of the equation – stood at 4.2 percent in October.

This is the figure the Riksbank looks at when it talks about its goal of keeping inflation at a rate of two percent.

Raising the country's main interest rate, also known as the policy rate (previously the repo rate), is the main way it tries to restrain inflation by cooling down the economy and discouraging spending.


"The forecast for the policy rate is that it may be raised further at the start of next year and that monetary policy needs to be contractionary for a relatively long period of time for inflation to fall back and stabilise close to the target of two percent," said the Riksbank.


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