Sweden: The Riksbank holds fire in August
The Riksbank stays put in August: At its meeting on 19 August, the Riksbank opted to leave the policy rate unchanged at 2.00%, in line with market expectations.
High domestic inflation drives hold: The Bank’s decision to leave rates unchanged was primarily justified by high domestic inflation, which rose more than expected during the summer and is above the Bank’s 2.0% target. The Bank said the inflation surge was temporary. Meanwhile, economic activity remains weak, with low growth, cautious household spending and stagnant labor market. Still, the Bank noted some favorable conditions for stronger economic activity going forward: Recent interest rate cuts and rising wages should boost the recovery.
Further easing likely before year-end: The Riksbank indicated that there is still some probability of an another interest rate cut later this year, in line with its June forecast. A majority of our panelists have penciled in a final 25 basis point cut before end-2025, while the remaining panelists see rates on hold through December. The Bank will reconvene on 22 September.