COPENHAGEN, Denmark -- Sweden's central bank on Tuesday raised its key interest rate by a full percentage point to combat the highest inflation in more than 30 years.
Riksbanken said inflation has risen rapidly -- to 9% in August, the highest level since 1991 -- "undermining households' purchasing power and making it more difficult for both companies and households to plan their finances."
The bank raised its policy rate to 1.75% and said it will keep tightening over the next six months as it tries to bring inflation back to its 2% target. In making the one-point increase, Riksbanken pointed to other central banks' rapidly raising rates as consumer prices soar.
The U.S. Federal Reserve's announcement Wednesday of an increase in interest rates of three-quarters of a point for the third consecutive time was expected to be followed by a similar announcement today by the Bank of England, whose half-point increase last month was its biggest in 27 years.
"During the pandemic, global imbalances arose between supply and demand," Sweden's central bank said. "Russia's war in Ukraine has pushed up prices even further on several important commodities and created serious disruptions on the energy markets in Europe, which has caused electricity and gas prices to rise to very high levels."
It added that "the good economic activity in Sweden has also contributed." Sweden is part of the European Union but does not use the euro currency, so it is not part of European Central Bank.