Sweden’s central bank kept its key interest rate unchanged at 1.75% as expected today, but said stronger growth and the risk that inflation will pick up in the months ahead meant a hike would probably come sooner than previously expected.
The Riksbank has been growing increasingly worried about inflation after higher-than-expected readings during the summer as a result of conflict in the Middle East and a stronger recovery in the economy at home.
“If the outlook for inflation and growth remains the same, the policy rate will rise before the end of the year,” central bank Governor Erik Thedeen told reporters.
Swedbank said there was a greater than 60% probability of a hike in November according to the Riksbank’s new rate path. The Riksbank also has a rate-setting meeting in December.
“I wouldn’t overstress the precision in the forecast,” Thedeen said. The Riksbank sees the policy rate averaging 2.07% in the first quarter of next year.
“What we are saying is that we think we will raise rates more than once as a result of the very strong economy coupled with supply chain disruptions,” Thedeen said.
While other central banks are already hiking rates, the Riksbank has been able to take a wait-and-see stance, leaving the policy rate unchanged since September 2025.
Relative to Europe, price pressures are currently relatively muted, even excluding the effects of temporary tax cuts, and unemployment remains high.
But the Riksbank is now convinced that it will need to act soon to keep inflation in check.
“We maintain our forecast of a policy rate of 2% in November and 2.25% in February next year,” Nordea economist Torbjorn Isaksson said.
Conflict in the Middle East has pushed the price of oil to around $100 a barrel, and a resolution looks distant.
The crown currency has been hit by a growing rate gap with the European Central Bank, which is expected to hike again before the end of the year.
Growth has also picked up sharply, and the central bank raised its GDP forecast for this year to 2.8% from the 2.2% seen in June.
“If there were to be signs of a larger and more persistent upturn in inflation, the Riksbank would raise the policy rate at a faster pace than in the current forecast,” the central bank said.
Analysts in a Reuters poll had been unanimous in seeing no change this time.
Meanwhile, Norway’s central bank raised its policy interest rate by 25 basis points to 4.5% today, seeking to contain inflation, as expected by a narrow majority of analysts in a Reuters poll.
