Sweden's central bank maintained its policy rate at 2.25% as anticipated, considering the sluggish domestic economy alongside the risks of rising inflation and emerging global trade tensions.
The Riksbank has reduced its key rate six times since last spring, as inflation has receded from a peak of over 10% in late 2022. The last reduction was made with the assessment that it had sufficiently supported the economy. Since then, inflation outcomes have exceeded expectations and remain well above the 2% target.
The central bank stated that the Executive Board has decided to keep the policy rate unchanged at 2.25% and expects it to remain at this level moving forward. They are closely monitoring developments and will take action if the outlook for inflation and economic activity necessitates it.
The Riksbank anticipates inflation will fall between 2% and 3% this year, with expectations of easing price pressures heading into the next year.
While analysts had uniformly predicted no change in rates, their opinions varied regarding future policy directions, influenced by U.S. trade policy, the war in Ukraine, Germany's expansionary fiscal plans, and their implications for inflation and growth.
This cautious approach indicates that the Riksbank is likely to avoid sudden moves that it might have to overturn quickly.
In the coming week, the policy decisions from the United States, the Bank of England, and the Swiss National Bank are also expected. On Wednesday, the Bank of England held its key rate steady and cautioned about heightened uncertainty.