Nomura's research analysts note that the the central bank of Sweden, Riksbank kept its policy rate at 1.75% in May, maintaining a wait-and-see stance as weak inflation offsets upside risks from global energy prices and the Iran war. Nomura expects no rate change in 2026 but warns that a sustained drop in energy prices could open the door to a cut later this year.

Riksbank waits with weak Swedish inflation

"The Riksbank left its policy rate unchanged at 1.75% at its May meeting, as we and consensus expected. It dropped guidance that the policy rate will remain at this level for some time to come and instead said “the current level of the policy rate gives the Riksbank a good initial position to adjust monetary policy if required to safeguard the inflation target.”"

"The policy statement was more dovish than in March, as policymakers highlighted weak economic activity and inflation, saying “we have seen signs that growth was weaker than expected at the start of the year” and “recent inflation outcomes have been clearly lower than the Riksbank's forecast”. April CPIF year-on-year inflation, out yesterday, surprised consensus to the downside for the sixth consecutive month and was 0.7pp below the Riksbank’s forecast."

"The Riksbank clearly sees scenarios in which it cuts as well as raises the policy rate, as it said, “the range of potential outcomes for what can happen going forward is wide and the Riksbank is monitoring developments closely.” This comes in contrast to other central banks (e.g., the ECB, which places more emphasis on scenarios from the Iran war that result in higher inflation and therefore likely more rate hikes than in the central scenario)."

"Overall, the Executive Board clearly views a wait-and-see approach as being the best strategy and that the current low inflation environment allows it much more time compared to other central banks to assess the potential for upward inflation pressures from the Iran war."

"We continue to expect no change in the Riksbank’s policy rate this year, as weak inflation is balanced by upside risks from the global energy price shock. However, we think a fall back in energy prices in the near future would create the risk of a policy rate cut this year, especially in light of April’s very low inflation print."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)