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Sweden’s central bank announces biggest interest rate hike in 30 years

Sweden's Riksbank has announced a shock one percent rise in interest rates, the biggest increase since it was given its two percent inflation target back in 1993.

Published: 20 September 2022 09:39 CEST
Sweden's central bank announces biggest interest rate hike in 30 years
Sweden's Riksbank. Photo: Jonas Ekströmer/TT

The bank has decided to raise its key interest rate, the repo rate, by one percentage point to 1.75 percent, wrong-footing analysts who had expected the bank to hike rates by just 75 points to 1.5 percent 

At a press conference announcing the decision, Stefan Ingves, the bank’s governor, apologised for not acting sooner to head off inflation. 

“There is nothing to do but apologise that it took a little time before we understood what was happening to the Swedish economy,” he said. “We’ve been wrong on our predictions on a number of occasions, but when inflation is as high as it is right now, it’s obvious what we are forced to do.”

Sweden’s inflation rate hit 9 percent in August, the highest level since 1991, indicating that the rate hikes imposed earlier in the year have not yet started to pulls price rises down. 

In a press release announcing its decision, the bank warned that high inflation “hollows out households’ buying power and makes it harder for both companies and households to plan their finances”.

Ingves said at the press conference that the pain consumers will face if inflationary expectations are allowed to take hold exceeds the pain that will be caused by a greater-than-expected rate hike. 

“This is about weighting up today against tomorrow,” he said. 

As well as increasing the rate itself, the bank announced that it would increase it in the future more than it had previously forecast, with the rate now projected to hit 2.5 percent in 2023, compared to 1.9 percent in its earlier prognosis, and 2.5 in 2024, compared to 2.0 percent earlier. 

“The prognosis indicates that the rate is going to raised again in the coming six months,” the bank wrote. “There is great uncertainty over the outlook for inflation, and the Riksbank is going to adjust monetary policy in whatever way is needed to ensure that inflation returns to the target.” 

Robert Bergqvist, senior economist at Sweden’s SEB Bank, wrote after the announcement that the hike was “not a happy step but a completely necessary one”. 

He said it showed a united central bank “throwing all its weight behind an aggressive exit policy”, which he predicted would start to bring inflation under control in 2023, allowing rate cuts as soon as 2024. 

But the decision was criticised by Torbjörn Hållö, chief economist at the Swedish Trade Union Confederation, who on Twitter called the decision “bizarre”, and “beyond all sense and balance”. 

He argued that today’s high inflation rate was driven by power and fuel shortages, meaning increasing interest rates would have no impact. 

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LANDSLIDE

IN NUMBERS: Sweden’s lucky escape as landslide causes huge motorway sinkhole

A busy Swedish motorway moved 50 metres as waves of mud came crashing down on the road. The incident is expected to cause months of traffic chaos – but numbers show that it could have been much worse.

Published: 25 September 2023 10:23 CEST
IN NUMBERS: Sweden's lucky escape as landslide causes huge motorway sinkhole

E6

The main motorway that connects Gothenburg and Oslo.

01.20am

A massive landslide at a motorway rest stop near Stenungsund is believed to have started at 1.20am, with emergency service SOS Alarm receiving the first call at 01.46am.

700 by 200 metres

An area of around 700 by 200 metres was directly affected by the landslide, with the worst parts destroying an area of around 150 by 100 metres, completely tearing up the motorway.

50 metres

Emergency services believe that the road in some places moved as much as 50 metres.

IN PICTURES:

The E6 motorway is destroyed in both northbound and southbound direction. Photo: Hanna Brunlöf Windell/TT

Three

Three people were taken to hospital with minor injuries. One of them was able to leave hospital on Sunday.

Zero

Fortunately, no one died in the landslide.

Police and rescue services have searched the area with dogs and don’t believe that anyone is still trapped in the mud and debris.

The injury count could have been much higher if the landslide had happened during rush hour, instead of in the early hours of Saturday.

“It’s unbelievably lucky that it happened in the middle of the night,” HannaSofie Pedersen, a climate expert at the Swedish Geotechnical Institute, told the TT news agency.

Ten truck drivers

Around ten truck drivers who had parked their vehicles along a slip road in the area overnight witnessed the landslide. They described waking up to loud noises and seeing the earth move.

One fast-food restaurant

A Burger King restaurant, a fuel station, a car wash and a DIY store are located at the scene. The restaurant, which completely collapsed under the mud, bore the brunt of the damage.

One construction site

Police are investigating whether blasting works at a nearby building site may have caused the landslide. The Aftonbladet newspaper reports that the company owning the site had dumped leftover sand close to the motorway in violation of their permit – a practice that caused a similar landslide at Munkedal in 2006. The company however denies any wrongdoing.

10,000-12,000 vehicles

The number of vehicles that normally pass Stenungsund on the E6 every day.

They will now be rerouted via the E45 and the 650 road, with transport authorities urging drivers to primarily choose the E45 option.

Several months

Sweden’s Transport Administration believes it’s going to take “several months” to repair the road.

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