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Sweden Monetary Policy May 2024

Sweden: Riksbank kicks off loosening cycle in May

At its meeting on 7 May, the Riksbank lowered the policy rate by 25 basis points to 3.75%. The cut was the first in eight years, and made Sweden only the second—after Switzerland—advanced economy to begin slashing rates. The decision was largely anticipated by the market.

The decision to lower rates was driven by inflation nearing the Bank’s 2.0% target, with consumer price inflation with a fixed interest rate (CPIF) at 2.2% in March, undershooting the Bank’s projections. Additionally, the Bank described economic activity as weak, reinforcing its decision to ease monetary policy.

The Riksbank’s forward guidance indicated that if the inflation outlook remains stable, it expects to cut the policy rate two more times during the second half of 2024. However, it also noted the uncertainty surrounding inflation, suggesting that future monetary policy adjustments would likely be gradual. The majority of our panelists pencil in two more 25 basis point cuts in H2, with most of the rest only expecting one more cut. The next meeting is set for 26 June, with the decision to be announced the following day.

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