STOCKHOLM -- Sweden’s central bank followed other central banks in undertaking a big increase to its key interest rate to combat inflation, saying Thursday that high prices are undermining people's purchasing power and making it tough for households and companies to plan their finances.
Riksbanken said the hike of three-quarters of a percentage point pushes the key rate to 2.5% — the highest in 14 years, according to Swedish news agency TT — and is meant “to bring down inflation and safeguard the inflation target."
Consumer prices rose 9.3% in October from a year earlier in the European Union country, lower than the 9.7% seen in September.
The big rate increase in Sweden, which does not use the euro currency so it is not part of the European Central Bank’s decision-making, builds on the jumbo full percentage point hike made in September.
It comes as the ECB, U.S. Federal Reserve and other central banks also have made large rate increases to fight inflation that has been squeezing people around the world.
In Sweden, the forecast “shows that the policy rate will probably be raised further at the beginning of next year and then be just below 3%,” the bank said.
“It is still difficult to assess how inflation will develop and the Riksbank will adapt monetary policy as necessary to ensure that inflation is brought back to the target within a reasonable time,” the bank said in a statement.
The decision on the policy rate will apply with effect from Nov. 30.
This story has been corrected to show that the rate of 2.5%, not the rate increase, is the highest in 14 years.