Sweden raises interest rate, signals more hikes

Sweden's central bank raised its benchmark interest rate by a quarter point to two percent on Wednesday and said further increases were likely.

The Riksbank said stronger economic activity, supply disruptions linked to the war in the Middle East and a weaker krona meant inflation was expected to rise above its two percent target.

“If the outlook for inflation and economic activity holds, it is likely that the policy rate will be raised further in the coming year,” the bank said.

The increase was Sweden's first rate rise since September 2023. The policy rate had been held at 1.75 percent since September 2025.

The Riksbank said CPIF inflation, its preferred gauge that strips out the impact of floating mortgage payments, was 1.5 percent in September. It said the rate was being held down by temporary fiscal measures, including a food tax cut, and was three percent when those measures were excluded.

The bank said risks to its outlook included supply disruptions, faster-than-expected Swedish growth and weaker demand linked to the global economy, geopolitical uncertainty, concerns about AI investments and weak public finances in some countries.