Sweden raises key interest rate to 3.5% to curb inflation

Sweden's central bank (Riksbank) announced a 50-percentage-point key interest rate hike to 3.5 percent on Wednesday, to curb continuous high inflation, reported Xinhua.

The Riksbank said the rate hike, which will come into effect on May 3, is necessary as the country's inflation is still far too high, and underlying inflation has been much higher than expected during the first few months of this year.

"High inflation affects in particular households that have small margins to begin with, but the development is negative for the whole economy," the Riksbank said in a press release, adding that "it is important for confidence in the inflation target that inflation falls clearly this year."

"The forecast indicates that the policy rate will "probably" be raised further by 25 basis points in June or September," and "inflation is expected to fall back this year and to stabilize close to 2 percent during 2024," it added.

The Riksbank also said that the country's gross domestic product (GDP) is expected to shrink by 0.7 percent in 2023, before a slight increase of 0.2 percent in 2024.

According to Statistics Sweden, the country's 12-month consumer price index (CPI) rate was still as high as 10.6 percent in March. Despite a slight fall from 12 percent in February, this was the seventh consecutive month with double-digit inflation.

To curb rampant inflation, the Riksbank has raised interest rates several times in the past few months. In February, the Riksbank raised its key interest rate by 50 basis points to 3 percent.