Sweden's central bank hike key interest rate, saying inflation is still too high

The Bank of England was meeting later Thursday, with financial markets split over whether there will be another hike or a pause.It came a day after the US Federal Reserve left its benchmark interest rate unchanged for the second time in its past three meetings, a sign that its moderating its fight against inflation as price pressures have eased.

Sweden's central bank raised its key interest rate Thursday, saying that “inflationary pressures in the Swedish economy are still too high,” although there were signs that inflation had begun to fall.

The Riksbank raised its policy rate by a quarter of a percentage point to 4 per cent and said its forecast indicated that it could be raised further.

”Inflation is also falling in Sweden. The rate of increase in energy and food prices has slowed significantly, which is positive,” the Riksbank said in a statement.

But the bank added that “inflation pressures are still too high,” noting that service prices are still rising rapidly and Sweden's currency, the krona, is “unjustifiably weak.” The Swedish currency has plunged to its lowest level ever against the euro and the US dollar.

Sweden has been struggling with high inflation — it was 7.5 per cent in August, down from 9.3 per cent in July, but far from the 2 per cent target set by Sweden's central bank.

''To ensure that inflation continues downwards and stabilises around the target within a reasonable period of time, monetary policy needs to be tightened further,” the bank said.

Thursday's interest rate increase meant that the policy rate is at the highest level since October 2008, the Swedish news agency TT wrote.

It comes on a busy day for central bank action. Neighbouring Norway's central bank also raised rates by a quarter-point Thursday, while the Swiss National Bank kept rates steady. The Bank of England was meeting later Thursday, with financial markets split over whether there will be another hike or a pause.

It came a day after the US Federal Reserve left its benchmark interest rate unchanged for the second time in its past three meetings, a sign that it's moderating its fight against inflation as price pressures have eased.

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