Monetary Policy Report, November 2022

To bring down inflation and safeguard the inflation target, the Executive Board has decided to raise the Riksbank’s policy rate by 0.75 percentage points to 2.5 per cent.

Inflation is still far too high. In October CPIF inflation was 9.3 per cent. This was slightly below the Riksbank's forecast in September, which is entirely due to energy prices being lower than expected. Excluding energy prices, inflation was instead higher than expected. There is still a substantial risk that the current high inflation will become embedded in expectations of households, companies, financial market agents and others. A high rate of inflation over a long time can create serious problems. Monetary policy therefore needs to act to enable inflation to fall back and stabilise around the target of 2 per cent within a reasonable time. The Executive Board thereby assesses that the policy rate needs to be raised more than in its assessment in September.

The Riksbank needs to cool off the economy so that inflation returns to the target. Rising prices and higher interest costs are certainly noticeable for households and companies. However, it would be even more noticeable for the Swedish economy if inflation were to remain at the current high level. By raising the policy rate more now, the Riksbank can reduce the risk that inflation will remain high for a long time. This will also reduce the risk of even greater monetary policy tightening later on. With this monetary policy, inflation is expected to fall back next year and to stabilise close to 2 per cent in 2024.

The forecast shows that the policy rate will probably be raised further at the beginning of next year and then be just below 3 per cent. However, the development of inflation going forward is still difficult to assess and the Riksbank will adapt monetary policy as necessary to ensure that inflation is brought back to the target within a reasonable time.