Riksbank Cuts Rates in Surprise Move to Bolster Economy

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.

The Sveriges Riksbank kept its policy rate unchanged at 1.75% for a third consecutive meeting at its first policy decision of 2026, in line with expectations. The central bank indicated that the rate is likely to remain at this level for some time as it assesses the impact of the current policy stance, which is expected to support stronger economic activity and help inflation stabilize around the target over the longer term. Policymakers, however, warned that uncertainty around inflation and growth has increased, driven in part by geopolitical tensions and shifts in US trade and foreign policy. While Sweden’s economy has remained resilient so far despite higher tariffs, household and business sentiment could weaken quickly. They also highlighted the krona’s impact on inflation and the effects of more expansionary fiscal policy in Sweden and abroad as key risks going forward.

The Swedish Riksbank left its policy rate unchanged at 1.75% during its December 2025 meeting, as widely expected, signaling that borrowing costs are likely to remain at current levels for some time. The Board considers the rate appropriate to support economic activity and guide inflation toward the 2% medium-term target. Economic prospects have improved slightly, and inflation is approaching the target. Policymakers noted that economic activity has strengthened since September, giving further evidence that the recovery is underway, though full normalization will take time. The Riksbank raised its growth forecast for next year to 2.9%, while CPIF is projected to fall to 0.9% in 2026 before returning to 2% in 2027. The central bank noted, however, that risks to both inflation and economic activity are still present.