The Riksbank raised its interest rate by a full percentage point in its most aggressive tightening of almost three decades of inflation targeting, starting a global round of monetary policy action to bring prices under control.
The Swedish central bank lifted its policy rate to 1.75 percent, defying the forecasts of most economists for a smaller move as officials escalated their response to price increases that have exceeded their forecasts for 11 straight months.
“The risk is still large that inflation becomes entrenched and it is extremely important that monetary policy acts to ensure that inflation falls back and stabilizes,” officials said in a statement in Stockholm.
Photo: Bloomberg
“Monetary policy now needs to act more than was anticipated in June,” they said.
By this time next year, the rate is likely to have reached 2.5 percent, which implies another 0.75 percentage points in tightening, their new forecasts showed.
The outsized move places the Riksbank alongside the Bank of Canada as the only two central banks overseeing the world’s 10 most-traded currencies to have hiked by such an amount this year.
The decision is a prelude to the highlight of the week, when US Federal Reserve policymakers are predicted to stick with a 75 basis point increase amid some investor speculation that they could go for a bigger increment as the Swedes have done.
Other counterparts also anticipated to hike rates this week include the Bank of England, the Swiss National Bank and Norway’s central bank, all of which are expected to keep up or even intensify the aggression of their policy stances.
Swedish inflation last month reached another three-decade high at 9 percent, highlighting how policymakers had underestimated price increases after what was long one of the most stimulus-friendly approaches in the rich world.
As it seeks to catch up, the Riksbank is facing a dilemma familiar to its global peers of how to dampen inflation without too much harm to the economy. That is especially acute in Sweden, where household indebtedness is high and more than 40 percent of outstanding mortgages feature rates that are set for periods of no more than three months.
The increase in borrowing costs has so far led to an 8 percent decline in house prices from a peak earlier this year, and a simultaneous run-up in energy and mortgage costs could lead to an accelerated slump.
The Riksbank cut all its growth forecasts and now expects the Swedish economy to contract 0.7 percent next year instead of expanding by that amount.
“It would be even more painful for the Swedish economy if inflation were to remain at the current high levels,” officials said. “By raising the policy rate more now, the risk of high inflation in the longer term is reduced and thereby the need for an even greater monetary tightening further ahead.”
ASML Holding NV’s new advanced chip machines have a daunting price tag, said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), one of the Dutch company’s biggest clients. “The cost is very high,” TSMC senior vice president Kevin Zhang (張曉強) said at a technology symposium in Amsterdam on Tuesday, referring to ASML’s latest system known as high-NA extreme ultraviolet (EUV). “I like the high-NA EUV’s capability, but I don’t like the sticker price,” Zhang said. ASML’s new chip machine can imprint semiconductors with lines that are just 8 nanometers thick — 1.7 times smaller than the previous generation. The machines cost 350 million euros (US$378 million)
EXPLOSION: A driver who was transporting waste material from the site was hit by a blunt object after an uncontrolled pressure release and thrown 6m from the truck Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) said yesterday there was no damage to its facilities after an incident at its Arizona factory construction site where a waste disposal truck driver was transported to hospital. Firefighters responded to an explosion on Wednesday afternoon at the TSMC plant in Phoenix, the Arizona Republic reported, citing the local fire department. Cesar Anguiano-Guitron, 41, was transporting waste material from the project site and stopped to inspect the tank when he was made aware of a potential problem, a police report seen by Bloomberg News showed. Following an “uncontrolled pressure release,” he was hit by a blunt
Quanta Computer Inc (廣達), which makes servers and laptop computers on a contract basis, yesterday said it expects artificial intelligence (AI) devices to bring explosive growth to Taiwan’s electronics industry, as AI applications are starting to run on edge devices such as AI PCs. Taiwanese electronics manufacturers such as chipmakers, component suppliers and hardware assemblers are likely to benefit from a rapid uptake of AI applications, Mike Yang (楊麒令), president of Quanta Cloud Technology Inc (雲達科技), a server manufacturing arm of Quanta, told reporters on the sidelines of a technology forum in Taipei yesterday. “I believe the growth potential is promising once
‘WORST OVER’: A large portion of Hon Hai’s non-operating loss came from Sharp’s large flat-screen business, but Young Liu said the situation is expected to improve Hon Hai Precision Industry Co (鴻海精密), a major iPhone assembler, yesterday reported annual growth of 72 percent in net profit last quarter, due to a dramatic decrease in losses from Sharp Corp’s display business. Net profit surged to NT$22 billion (US$678.7 million) last quarter, from NT$12.83 billion a year earlier, as Hon Hai booked a non-operating loss of NT$4.24 billion, an improvement from NT$20.12 billion in the first quarter of last year. A major portion of its non-operating loss came from Sharp’s large flat-screen business Sakai Display Products Corp. On a quarterly basis, Hon Hai’s net profit sank 59 percent from NT$53.15