Swedish central bank hikes policy rate to 4%, as expected

The sign for Sweden’s central bank is pictured in Stockholm, Sweden, Aug 12, 2016. REUTERS/Violette Goarant/File Photo

STOCKHOLM  – Sweden’s central bank raised its key policy rate by a quarter percentage point to 4 percent as expected on Thursday and said it might need to do more to bring inflation back to its 2-percent target.

“Developments are thus going in the right direction, but inflationary pressures in the Swedish economy are still too high,” the central bank said in a statement.

“The forecast for the policy rate indicates that it could be raised further.”

The Riksbank has now increased the policy rate at eight consecutive meetings to fight a surge in inflation that peaked at more than 10 percent in December last year.

READ: Swedish inflation slows in August, Riksbank still expected to hike rates

Headline inflation stood at 4.7 percent in August, still well above the 2 percent target.

Analysts in a Reuters poll had forecast a quarter point hike and were roughly evenly split over whether the Riksbank would tighten again in November.

At its last meeting in June, the Riksbank said it expected to hike the policy rate at least once more this year.

The Riksbank also announced it had decided to hedge a part of its foreign exchange reserves by selling $8 billion and 2 billion euros for crowns. It believes the Swedish currency is undervalued.