STOCKHOLM, June 29 (Xinhua) -- Sweden's central bank on Thursday announced a 25 basis point hike of its benchmark interest rate to 3.75 percent -- a level not seen since 2008.
It is the seventh consecutive rate hike by the Riksbank since May last year. Before this round of interest rate hikes, the policy rate in Sweden had been at zero or sub-zero for more than seven years.
Another increase is also likely to come before the end of the year, the Riksbank said in a press release.
Inflation in the country stood at 9.7 percent in May, according to Statistics Sweden. Although it is falling, the rate is still "far too high," the bank said.
The unexpected rapid rise in service prices, which may reflect demand pressures in parts of the Swedish economy, is the main reason for the high inflation. The weak krona is also contributing to keeping inflation up, the bank added.
"The high inflation is being felt by households with small margins in particular, but is also problematic for the economy as a whole. It is therefore of the utmost importance that inflation falls back to the target of 2 percent within a reasonable period of time," the Riksbank said.
In the bank's latest forecast, inflation is expected to remain substantially above the target, at 8.9 percent this year and 4.3 percent in 2024, before reaching 2.3 percent in 2025 and 1.9 percent in 2026.
The Swedish economy is expected to shrink by 0.5 percent this year, stay level in 2024, and only grow slightly by 1.8 percent in 2025.
