The Riksbank has decided not to change the policy rate. It remains at 1.75 percent, but the central bank does not rule out that the rate may have to be raised later this year.

The decision comes after a summer where both inflation and economic growth have developed more strongly than the Riksbank predicted in its latest forecast from June.

At the same time, the labor market situation remains weak, with high unemployment. The measured inflation rate is still low, but underlying inflation is closer to 2 percent when, for instance, energy prices and temporary fiscal effects are excluded.

An important factor in the Riksbank’s assessment is the development in the Middle East. The war in Iran and the Hormuz Strait has continued to affect the global economy and created disruptions in, among other things, supply chains and supply. This is according to a press release by the Riksbank.

SEE ALSO: Bank: Two interest rate hikes this year – after the Iran war and the parties’ election pledges

So far, the effects have been less extensive than feared when the conflict started. Oil and other commodity prices have fallen from previous levels, while companies and markets have to some extent managed to adapt.

The Riksbank, however, still sees a risk that the disruptions could contribute to higher inflation. At the same time, there are signs pointing in the opposite direction. Companies’ plans to raise prices have subsided and problems in global supply chains have decreased.

Opens for a Hike

Despite today’s unchanged rate, the Riksbank leaves the door open for tightening. If the higher inflation seen during the summer turns out to be the start of a more lasting increase, the central bank may raise the rate.

The Riksbank’s assessment is therefore that the probability of a rate hike later this year still remains.

SEE ALSO: Danske Bank: Riksbank to raise the rate twice this year