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Sweden’s Riksbank became the latest national bank to take action against inflation, raising its key interest rate by a half-point to 0.75 percent last week.
Inflation ran at 7.2 percent in Sweden during this year’s first quarter, the fastest pace since 1991 and almost four times the bank’s 2-percent target rate.
“The policy rate will be raised further and will be close to 2 percent at the start of next year,” the bank said in a statement announcing the higher rate.
Inflation will remain above 7 percent this year, the bank warned, and pledged to “counteract the high inflation becoming entrenched” in wages and prices.
The bank also will buy the equivalent of $3.6 billion in bonds during the year’s second half, just half as much as in the first six months, it announced.
TREND FORECAST: Sweden’s krona has lost 11.6 percent against the dollar so far this year and 3.8 percent against the euro, making imports from two of its key trading partners more costly. The higher the U.S. Federal Reserve raises rates, the lower the krona will fall and the deeper the Swedish economy will fall into Dragflation: Negative economic growth, rising inflation as it costs the people to pay more to buy less.