Sweden’s central bank lowered its key interest rate from 2.25% to 2% today, as expected. The bank said mild inflation gave it room to support the country’s weak economic growth.
“The economic recovery that started last year has slowed down, and inflation is now expected to be lower than previously forecast,” the Riksbank said in a statement.
The bank also said there is a chance of another rate cut later this year.
The last rate cut was in February, when the central bank suggested that the easing cycle, which began in spring 2024, might be ending.
However, uncertainty caused by US President Donald Trump’s shifting tariff policies has hurt business and consumer confidence, putting pressure on growth.
In May, the Riksbank kept rates unchanged but said that if inflation stayed low, easing monetary policy could be justified in the coming months.
Recent data showed only mild inflation, and most analysts in a Reuters poll expected the rate cut. The median forecast had predicted no further changes this year.
Sweden’s GDP shrank by 0.2% in the first quarter, but March and April showed some signs of improvement. Still, the economy is expected to remain weak, with think tank NIER forecasting just 0.9% growth for the year.
“There are good conditions for stronger economic activity in Sweden, but the recovery is slower than expected,” the Riksbank said.
The next rate decision is scheduled for August 20.
