Sweden central bank official signals possible rate hike in December

Sweden’s central bank may raise interest rates again in December following last week’s increase to 2%, Deputy Governor Per Jansson said, according to minutes from the Nov. 3 meeting released on Tuesday.

The Riksbank raised its policy rate by 0.25 percentage points from 1.75% on Thursday, matching analyst expectations. The bank maintained its September rate forecast, which Jansson said indicated just under two additional increases ahead.

Jansson noted that the bank’s target measure, CPIF inflation, climbed to 1.5% in September from 0.7% in August. Energy prices contributed 1 percentage point to inflation in September, up from 0.3 points in the prior month.

When excluding temporary government fiscal measures, inflation stood at 3.0% in September. Without energy prices, the rate was 1.6%, below the bank’s 1.8% forecast, Governor Erik Thedéen said. He attributed the gap partly to travel prices rising less than expected.

Jansson characterized the planned rate increases as a "relatively cautious normalisation" of policy, stating there was "nothing dramatic about this."

First Deputy Governor Aino Bunge advocated for a gradual approach that permits evaluation of each step. She said weaker household demand could reduce the need for continued tightening.

Thedéen said he expected increases aligned with the September forecast over approximately the next six months if no major surprises occur.

Thedéen said Sweden’s GDP is forecast to grow by nearly 3% this year. He identified crude oil as an inflation risk, noting it has risen about 50% since late June or early July, when it traded just over $70 per barrel.

The krona has strengthened by nearly 3% against the euro and about 1% against the dollar since shortly after the September decision, Jansson said. A bank market economist noted the krona has weakened the most among G10 currencies against the dollar this year.

A survey showed household confidence fell sharply in October.