Riksbank cuts rates again, but easing cycle likely over for now
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Sweden's central bank has lowered interest rates for the fifth straight meeting, but indicated that further monetary easing was unlikely in the coming months as it waits for recent cuts to take effect.
The Riksbank reduced the key policy rate by 25 basis points to 2.25%, as expected by economists and in line with the central bank's own guidance last month to cut rates "once again during the first half of 2025".
Policymakers have lowered rates at each of the five past meetings and six times in total since May, marking a 175bp reduction since rates reached a decades-high level of 4%.
In a statement on Wednesday, the Riksbank said there were signs that an economic recovery was around the corner, but activity still remains weak.
"Last year’s interest rate cuts have had a positive impact on households’ and companies’ finances. But they have yet to reach full impact on interest expenses and demand in the economy. New information since December indicates that the outlook for inflation and economic activity remains largely the same," the central bank said.
Lower rates are expected to gradually filter across to make a positive contribution to demand, it said, so the guidance for one rate cut during the first half remains unchanged.
However, the Riksbank said it was "prepared to act" if the outlook changes. The central bank highlighted macro developments overseas – "for instance with regard to economic policy in the United States and Europe and the geopolitical tensions" – and the krona exchange rate as factors that could affect the economic outlook.