By Dominic Chopping
STOCKHOLM–Sweden’s central bank on Thursday lifted its key policy rate to 3.75% from 3.50%, as expected, and signaled a further hike later in the year as it continues to fight stubbornly high inflation.
The Riksbank’s new rate path now implies the rate will peak at around 4.05% from around 3.65% previously, and remain at that level well into 2025.
“For inflation to return to the target of 2% within a reasonable period of time, monetary policy needs to be tightened further,” the central bank said.
“The forecast is for the policy rate to be increased at least one more time this year,” it said.
The Riksbank said that new information, such as service prices rising unexpectedly fast and a weaker krona, indicates that inflation is declining more slowly than expected.
Alongside Thursday’s rate decision, the central bank said it will expand government bond sales to 5 billion Swedish kronor ($463.6 million) a month from SEK3.5 billion from September, a move it said could contribute to a stronger krona and improve its capacity to reduce inflation.
The Riksbank added that it is exploring ways to reduce currency risk by hedging part of its foreign exchange reserves. The starting point for this would be to hedge around 25% of its SEK410 billion reserves, it said.
Write to Dominic Chopping at dominic.chopping@wsj.com