Sweden’s Riksbank says policy must remain tight, can’t rule out hike

© Reuters. FILE PHOTO: Riksbank governor Erik Thedeen presents the monetary policy decision, as the Executive Board raises the key interest rate by 0.25 percentage points to 3.75 percent, in Stockholm, Sweden June 29, 2023. TT News Agency/Stefan Jerrevang via REUTER

STOCKHOLM (Reuters) – Swedish monetary policy needs to remain tight for some time and the policy rate may need to be raised further if the inflation outlook deteriorates, the minutes of the central bank’s most recent meeting, published on Monday, showed.

Late last month, the central bank kept its key policy rate unchanged at 4.00%, saying that policy was now having a real impact after eight rate hikes in a row and that inflation was heading in the right direction.

“It is now a question of ensuring that inflation will come all the way down to the target of two per cent and that it will stabilise there,” Governor Erik Thedeen said in the minutes.

“If new data is received that indicates inflation is not continuing its downward trend towards the target, we have plenty of opportunity to take action at coming meetings.”

Several policy makers said that policy needed to remain restrictive for some time in order to ensure that inflation comes back to the 2% target.

Markets believe the Riksbank has probably done hiking and see the next rate move being a cut after the middle of next year.

The Federal Reserve, the European Central Bank and the Bank of England are also expected to cut next year.

The Riksbank will publish its next rate decision on Feb 1.

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