Policy rate held at 1.75 percent as Thedéen signals November hike
The Executive Board of the Riksbank unanimously kept the policy rate at 1.75 percent on September 23, while revising the rate path upward. Board members indicated that an initial rate increase to 2.0 percent could occur at the November meeting amid stronger growth and persistent supply shocks.
Preparing to reduce the sail area
The Executive Board of Sveriges Riksbank—comprising Erik Thedéen, Aino Bunge, Per Jansson, Anna Seim and Göran Hjelm—unanimously voted to maintain the policy rate at 1.75 percent.
While headline CPIF stood at 0.7 percent in August due to temporary tax measures, underlying inflation reached 1.6 percent, or 2.2 percent excluding fiscal effects.
Second-quarter GDP expanded by 1.6 percent quarter-on-quarter, bringing annual Swedish growth to 3.3 percent.
Governor Thedéen and Deputy Governor Seim signaled that policy tightening is likely in November.
“For now, we can still sail in full sail, but in November we probably need to reduce the sail area,” Thedéen noted, pointing to rising global energy costs.
Geopolitics and currency pressure
Geopolitical tensions between the United States and Iran have driven oil prices above $100 per barrel, heightening international supply disruptions.
Since August, the krona has depreciated by 2 percent against the euro and over 4 percent against the US dollar.
Concurrently, both the Federal Reserve and the European Central Bank raised their policy rates by 25bp in September.
Domestically, the financial system remains resilient, though rising debt financing in the AI sector and sovereign yield increases require monitoring.
Delaying the inevitable hike
The minutes reveal a central bank that is merely biding time before reversing its previous easing stance.
Masking underlying inflationary momentum behind temporary tax breaks carries the real risk of falling behind the curve.
A rate increase in November appears not just probable, but overdue given external pressures.