On Thursday morning, the Swedish Central Bank held a press conference and announced a 0.5% interest rate hike and the benchmark interest rate increased from 0.25% to 0.75%. This is the largest rate hike in the Swedish central bank in 22 years. The last time the interest rate was raised by 0.5% in one breath was in February 2000, when the benchmark interest rate was raised from 3.25% to 3.75%.
Central Bank Governor Stefan Ingves told the media: "The signal is very clear. The inflation rate is too high, we must raise interest rates."
Since the war between Russia and Ukraine, Sweden's inflation rate has suddenly risen to more than 7% in a few months, and according to current estimates, it is unlikely to drop below 7% by the end of the year. Financial management expert Mohammed Salih said: "The central bank's primary task is to ensure the long-term stability of prices, but the current prices are unstable, and the benchmark interest rate is a tool used by the central bank to regulate prices." Sweden's inflation rate target is 2%, and the current 7% is significantly far exceeding the target value.
Sweden's benchmark interest rate has remained negative since 2014, and it was not until the end of 2019 that the benchmark interest rate was raised to zero (Daily News: Sweden's five-year negative interest rate era ended yesterday). At the end of April this year, due to inflation, the Swedish central bank adjusted the benchmark interest rate to a positive for the first time in eight years, at 0.25%. After the interest rate hike, housing prices in Sweden's top three cities fell. Apartment prices in the capital Stockholm fell by 7% in 2 and a half months ( House prices in the three major cities of Sweden fell across the board ).
Now, just two months later, the central bank has raised interest rates again, and the amplitude is twice that of the last time. Just two and a half hours after the news was released, Handelsbanken raised the three-month floating interest rate from 2.69% to 3.19%.
SEB Bank expects the benchmark interest rate to be raised again in September this year, from 0.75% to 1.25%. Central Bank Governor Stefan Ingves also foreshadowed the continued interest rate hike. He said: "Interest rates will continue to rise. In the long run, the interest rate may remain at around 2%. "
