Swedish Interest Rate Cut – Currency Thoughts
Swedish Interest Rate Cut
June 18, 2025
The Swedish Riksbank’s rate cut from 2.25% to 2.0% had been widely expected. It was the first change since a 25-basis point cut in January. At 2.0%, the new rate is half the peak of 4.0% from September 2023 to May 2024 and at its lowest level since November 2022. Swedish monetary officials are likely not done with this rate reduction cycle, but that point is not far away. Updated forecasts show the chance of one more 25-bp cut in the second half of 2025 or perhaps early in 2026. Projected Swedish growth this year was revised downward by 0.7 percentage points to 1.2%, and a weaker demand dynamic due to trade policy changes and geopolitical strains is expected to foster lower inflation. The targeted CPIF path now is forecast to rise 2.4% this year, then 1.7% in 2026. A released statement cautions that
The outlook for inflation and economic activity is uncertain. There are substantial risks linked to trade policy and the geopolitical tensions, not least as a result of the escalating conflict in the Middle East, which could affect economic developments abroad. These risks and the questions about the strength of domestic demand mean that it is uncertain how quickly the Swedish economy will recover.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Swedish Riksbank
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