Sweden raises policy rate to 2.5 pct to curb inflation

This photo taken on Sept. 27, 2022 shows Sweden's central bank Riksbank in Stockholm, Sweden. Sweden's central bank (Riksbank) announced on Thursday a 75-percentage-point key rate hike to 2.5 percent -- the highest in 14 years. (Xinhua/Fu Yiming)

STOCKHOLM, Nov. 24 (Xinhua) -- Sweden's central bank (Riksbank) announced on Thursday a 75-percentage-point key rate hike to 2.5 percent -- the highest in 14 years.

The Riksbank said the rate hike, which will go into effect on Nov. 30, was necessary as the country's 12-month consumer price index (CPI) hit 10.9 percent in October.

"Disregarding energy prices, inflation has been unexpectedly high, which indicates that inflationary pressures are somewhat higher than expected," the Riksbank said in a press release, "it is very important that monetary policy acts to ensure inflation falls back and stabilizes around the target of 2 percent within a reasonable time."

This photo taken on Sept. 27, 2022 shows the logo of Sweden's central bank Riksbank in Stockholm, Sweden. Sweden's central bank (Riksbank) announced on Thursday a 75-percentage-point key rate hike to 2.5 percent -- the highest in 14 years. (Xinhua/Fu Yiming)

This is the fourth rate hike since May this year, and the Riksbank also said that further hikes were likely.

"The policy rate is expected to be raised further at the beginning of next year to then be just under 3 percent," it said.

In its Monetary Policy Report, the Riksbank also said that the country's gross domestic product (GDP) is expected to shrink by 1.2 percent in 2023 before starting to slowly increase again in 2024.