Sweden: The Riksbank cuts rates for third time this year in September
The Riksbank surprises markets and reduces rates to three-year low: At its meeting on 22 September, the Riksbank resumed its loosening cycle, cutting its policy rate by 25 basis points to 1.75%. September’s reduction was the third this year, largely took markets by surprise—a hold had been anticipated—and left rates at a three-year low.
Core inflation moderated and the need to support growth takes center stage: The rate cut by the Riksbank was driven by a decline in inflation excluding energy prices, suggesting that still-high price pressures might be transitory. Additionally, the Bank noted that economic growth has now been weak for “a long time” and that there is a need to support economic recovery. Moreover, the recovery in the labor market is taking longer than anticipated.
Loosening cycle seemingly reaches the end of the road: The Riksbank’s forward guidance indicated that it expects to keep its policy rate at 1.75% for some time—the Bank’s rate path doesn’t foresee new reductions until 2028. The Bank will reconvene on 4 November, with the policy decision announced the following day. Our panelists are currently adjusting their forecasts following the surprise rate reduction.