Sweden Central Bank Increases Interest Rate 25bps to 2.00%

Sweden's Riksbank raised its benchmark repo rate by 25 basis points to 2.00% from 1.75% previously.  The Bank said: "The Swedish economy is growing at a good rate, although international developments are marked by uncertainty,".  On inflation, the Bank noted: "Consumer price inflation is high at present as a result of rising mortgage rates.  Underlying inflationary pressures remain low, but are expected to increase as economic activity strengthens."  

The Riksbank last increased the benchmark repo rate by 25 basis points to 1.75% at its April meeting this year.  Sweden reported annual inflation of 3.3% in May, the same as April, and up slightly from 2.9% in March; while also above the Riksbank's inflation target of 2.0%.  Market expectations are for further interest rate increases from the Bank, with the repo rate expected to be 2.3% in Q4 2011, and 2.9% in Q3 2012.  The Swedish Krona last traded around 6.26 against the US dollar.

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