Sweden’s Riksbank raised its policy rate by 0.25 percentage points to 2% on Nov. 4, citing stronger economic conditions and cost increases linked to supply disruptions. The bank said a further increase over the coming year was likely if its inflation and economic outlook remained on track, in line with its September rate forecast.
The Riksbank said supply disruptions linked to the war in the Middle East had kept global inflationary pressure elevated. Energy prices had risen further, and inflation abroad had increased.
In Sweden, CPIF inflation was 1.5% in September, matching the bank’s latest forecast. Temporary fiscal measures were holding down the reported rate; excluding their direct effects, inflation was 3%.
A measure that excludes energy, which the Riksbank said best reflects underlying inflation at present, was 1.6%, slightly below expectations. Indicators showed cost pressures remained above normal.
Preliminary data showed GDP and employment both increased in the third quarter, in line with the bank’s forecast. Household sentiment fell in October, while business sentiment rose further.
The Riksbank said recent developments had broadly matched its forecast for the business cycle to strengthen further and return to normal next year. It also expects labour-market conditions to keep improving. A stronger economy, supply-related cost increases and a weaker krona this year are expected to push both CPIF inflation and underlying inflation above 2% next year.
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