Sweden Interest Rate

Sweden’s central bank held its policy rate at 1.75% in June 2026 but raised the likelihood of a hike later this year, citing growing inflation risks. While inflation remains subdued, largely due to the dampening effects of fiscal policy measures, and economic activity is weak, policymakers highlighted that prolonged supply disruptions from the Middle East conflict have heightened inflationary pressures and could amplify price effects if they persist. The Riksbank’s outlook assumes oil supply will normalize soon, with prices expected to fall, limiting the pass-through to import and consumer prices. However, uncertainty remains significant. The bank revised its 2026 inflation forecast down to 0.6% (from 0.8% in March) but increased projections for 2027 to 2.7% (from 2.0%). Inflation expectations for 2028 were little-changed at 3.4%.

The Swedish Riksbank kept its key policy rate unchanged at 1.75% for a fifth consecutive meeting in May 2026, in line with expectations, saying the current policy rate provides a solid starting point for adjusting monetary policy if needed to safeguard the inflation target. Policymakers noted that the risk of the war in the Middle East leading to higher inflation has increased somewhat. However, inflation currently remains below target, and recent data have come in significantly weaker than the Riksbank’s March forecast. At the same time, economic activity remains subdued. As a result, there is room to wait for a clearer assessment of the impact of the conflict and the supply shocks associated with it. The central bank stressed that uncertainty remains high and that developments warrant close monitoring. It also warned that if the war were to have major effects on the global economy and trigger a broad and persistent rise in inflation, it could be forced to raise the policy rate.

The Sveriges Riksbank left its policy rate unchanged at 1.75% for a fourth straight meeting in March 2026, signaling that borrowing costs will likely remain at this level for the foreseeable future. However, the central bank emphasized that the ongoing war in the Middle East introduces significant uncertainty to its economic projections. In its highly uncertain baseline scenario, the Riksbank assumes the conflict will have only moderate effects on inflation and economic recovery, though policymakers cautioned it is too early to fully assess its impact. The bank expects CPIF inflation to return to target by 2029, as temporary pressures from energy prices and VAT adjustments fade. Yet, the Riksbank stressed it remains ready to act in either direction: raising rates if inflation proves more persistent, even at the cost of weaker economic activity, or cutting rates if demand weakens significantly while inflationary pressures ease.