Sweden's Central Bank Holds Rate Steady Amid Rising Uncertainties

The Riksbank remains firm on its 1.75% interest rate amid rising uncertainties in the economic and inflation outlook. While geopolitical tensions and currency fluctuations add complexity, a rare economic 'Goldilocks' moment could lead to potential policy adjustments. Analysts predict a rate cut as early as the year's end.

The Riksbank, Sweden's central bank, decided to maintain its key interest rate at 1.75%, in line with expectations, and indicated that no change is anticipated for the remainder of the year.

Despite enjoying a 'Goldilocks' moment where economic growth aligns closely with the inflation target of 2%, the Riksbank expressed caution due to increased uncertainty surrounding inflation and economic activity. The bank is prepared to adjust monetary policy should the economic outlook evolve.

Analysts note the uncertain factors include the development of the krona and the effects of expansionary fiscal policies both domestically and abroad. While a rate cut is possible by the end of the year, the most likely scenario remains steady rates until 2027, with a possible hike in early 2027. The Riksbank plans to reveal its next policy move on March 19.

(With inputs from agencies.)