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STOCKHOLM – Sweden’s central bank held its key rate unchanged at 4.00% on Wednesday as expected and said that inflation pressures had now eased enough for the policy rate to be cut in the coming months.

Headline inflation is now close to the central bank’s 2% target after peaking at over 10% and is expected to keep falling.

Meanwhile, growth in large parts of the economy has ground to a halt and many households are struggling with mortgage payments at their highest level for more than 15 years.

“It is likely that the policy rate can be cut in May or June if inflation prospects remain favourable,” the central bank said in a statement.

The Riksbank said that it remained concerned about setbacks, not least the chance that easier policy could weaken the Swedish crown.

“Monetary policy should therefore be adjusted cautiously going forward, in the form of gradual cuts in the policy rate,” the central bank said.

It forecast the policy rate at 3.2% in the first quarter of 2025.

The Swedish crown weakened marginally against the euro after the decision was published.

With inflation seemingly tamed, central banks around the world are weighing up when to start easing policy. The Swiss National Bank was the first out of the blocks last week with the U.S. Federal Reserve and the European Central Bank expected to follow suit in June.

In February, the Riksbank said rates had peaked and that it might be possible to ease policy in the first half of the year.

Analysts in a Reuters poll had forecast no change in rates at the March meeting and for the central bank to flag a cut in May or June – the first of several seen this year.

The Riksbank announces its next monetary policy decision on May 8.

  • Published On Mar 27, 2024 at 06:30 PM IST

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