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Record high policy rate in an attempt to fight inflation

Published by Karl Martin Karus in category Precious metals on 31.01.2023
Gold price (XAU-SEK)
20 324,57 SEK/oz
- 281,25 SEK
Silver price (XAG-SEK)
239,47 SEK/oz
- 2,44 SEK

We are now in the new year and can see that inflation is still at a record high level. Inflation has now been at a high level for a longer period and the Riksbank is constantly working to combat it. On 06/08/2022, the Riksbank’s repo rate changed its name to the Riksbank’s policy rate in order to get a more appropriate name, but it has exactly the same function and purpose as before.

The Riksbank started raising the policy rate sharply in May last year in an attempt to counter inflation and has not stopped since, the policy rate is currently up to 2.5%. It is likely that the Riksbank will raise the policy rate by a further total of 75 basis points, which would mean a peak of 3.25%.

Due to the tight situation we now find ourselves in, there is also an “increased risk” that the Riksbank will be forced to raise the policy rate by a total of 100 points. The reason for this is that inflation has proven to be “quite sticky” according to the latest results. Therefore, there is an explicit interest from the Riksbank in supporting the krona, which would be helpful when it comes to fighting inflation in Sweden.

ING Economics writes “The easiest way to support the krona is not to underdeliver compared to market expectations with monetary tightening, especially in a situation where the ECB is tightening aggressively”.

Inflation is rampant and the key interest rate is at record high levels, not so bright signs for Sweden’s economy. We are already in the recession that is believed to last until 2025. It is therefore more important than ever to have a plan for how you want to invest your capital for minimal risk.

While economic times remain uncertain, you can protect your assets from inflation by investing in precious metals.

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