MNI BRIEF: Riksbank Hikes 100bps, But Path Seen Slowing

The Riskbank raised its key interest rate 100 bps Tuesday, lifting the Policy Rate to 1.75% and indicated that it was heavily front-loading policy tightening. The bank's published projections showed the policy rate rising another 75 basis points this year but then holding at close to a 2.5% peak.

The central bank's projections showed the rate at 2.53% in Q3 2023, up from 1.94% in the previous forecast round, before dipping to 2.47% by Q3 2024 and on down to 2.35% at the end of the three year forecast horizon. The approach entails that its end 2022 policy rate level is roughly in line with market expectations, albeit with a more aggressive hike in September than the 75bps than many analysts had expected,

The Swedish central bank's rate peak, however, is well below that anticipated in other advanced economies. In its policy statement the board warned of the risk of self-reinforcing higher inflation expectations if it had not acted fast. The hike, at the upper end of expectations, saw European bond yields higher across the board, as rate increase expectations again get pushed higher across the eurozone.