Key Takeaways
- Sweden’s Riksbank is widely expected to leave its policy rate unchanged at 1.75% at its May 7 meeting.
- Underlying inflation remains well below target, but rising energy prices continue to pose upside risks.
- Policymakers are likely to adopt a more vigilant tone, signaling readiness to act if inflation pressures broaden.
Sweden’s Riksbank is expected to keep its policy rate unchanged at 1.75% when it announces its decision on May 7. While the outcome itself is largely a foregone conclusion, the communication will be closely scrutinized for any shift in tone as geopolitical risks persist.
“For each day that the war in the Middle East continues and the Strait of Hormuz remains closed, inflation risks increase. The key question is whether the elevated oil price spills over into other goods and services, leading to a broader rise in inflation,” says Torbjorn Isaksson, chief analyst at Nordea.
Inflation pressures in Sweden have generally surprised on the downside in recent months, which before the escalation of the Iran war had raised expectations of a possible rate cut in 2026. However, the surge in energy prices and rising geopolitical risks have shifted the situation from a risk of low to high inflation.
“With the inflation surge of 2022 still fresh in mind, the Riksbank and its central-bank peers are remaining vigilant and want to act in time if inflation appears to be accelerating,” Isaksson adds.
Low Inflation Gives the Riksbank Breathing Room
Despite external risks, Sweden enters this period from a relatively favorable position. Inflation remains subdued compared with many other economies, and the krona has been broadly stable.
Core inflation, measured as CPIF excluding energy, has continued to undershoot expectations. SEB highlights that underlying inflation has surprised on the downside for several consecutive months, suggesting that domestic price pressures remain weak.
This gives the Riksbank scope to remain on hold and assess incoming data, even as global uncertainty rises.
“Unlike several other central banks, the Riksbank is under no immediate pressure to respond,” says Ulf Andersson, chief economist at DNB Carnegie.
While he notes that temporary effects are likely, such as higher inflation and subdued activity, the Swedish economy remains in a fundamentally strong position as “growth was solid last year and inflation is low.”
At the same time, fiscal policy measures, including fuel tax adjustments and temporarily lower VAT on food, are cushioning some of the inflationary impact from higher energy prices.
Nordea also highlights that although the Swedish government has flagged that fuel rationing cannot be ruled out, the fuel industry and the Swedish Energy Agency are playing down the risks. “One reason is that Sweden does not import oil from countries in the Persian Gulf. In the energy area, the situation is thus not acute for Sweden,” says Nordea’s Isaksson.
Will the Riksbank Raise Interest Rates in 2026?
Markets have shifted to pricing a higher probability of rate hikes globally, reflecting concerns that energy costs could drive inflation higher again. Currently, a 35 basis point hike from the Riksbank is priced in until December this year, with a rate hike most like in August or September.
“Price movements are driven primarily by expectations regarding other central banks, particularly the ECB, and the market appears to be concerned about a repeat of the dramatic upward inflation surprises that followed Russia’s invasion of Ukraine in 2022,” say Olle Holmgren, chief strategist, and Amanda Sundstrom, FX and fixed income strategist at SEB.
If it were not for the war in the Middle East, they believe the Riksbank would be close to cutting interest rates, given the continued unexpectedly low inflation in Sweden and the doubts that have arisen regarding the strength of the economic recovery.
“As long as uncertainty surrounding inflation persists and other central banks are expected to raise interest rates in the near term, it is unlikely that the Riksbank would consider a rate cut. However, we assess that the probability of an interest rate hike this year is low, especially if the ECB raises rates only once, in line with our forecast,” they add, reiterating their forecast that the Riksbank will keep the policy rate unchanged at 1.75% through the end of next year.
Handelsbanken and Nordea also forecast an unchanged policy rate from the Riksbank for the remainder of the year, while DNB Carnegie have a rate hike penciled in for November.
When Are the Next Interest Rate Decisions for Sweden’s Riksbank?
The upcoming rate decisions will be announced on the following dates:
- May 7
- June 17
- Aug. 20
- Sep. 24
