Riksbank raises key rate to 2% — The Local Sweden

Sweden's central bank, the Riksbank, on Wednesday raised its key interest rate from 1.75% to 2%. This was reported by The Local Sweden. The decision means an increase of 0.25 percentage points.

A monetary policy tool

The key rate, which the Riksbank calls the policy rate, is the central bank's main monetary policy tool. It determines the rates at which Swedish banks can deposit funds with the Riksbank and borrow money from it.

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These terms affect the interest rates banks set on savings, loans and mortgages. Thus, a change in the key rate may affect the cost of borrowing for the public.

Impact on inflation

Higher bank rates make borrowing more expensive. According to the publication, this causes people to spend less, and reduced spending ultimately helps lower inflation.