Riksbank Holds Rate, Flags Possible Hike

Sweden’s central bank held its policy rate at 1.75% in June 2026 but raised the likelihood of a hike later this year, citing growing inflation risks. While inflation remains subdued, largely due to the dampening effects of fiscal policy measures, and economic activity is weak, policymakers highlighted that prolonged supply disruptions from the Middle East conflict have heightened inflationary pressures and could amplify price effects if they persist. The Riksbank’s outlook assumes oil supply will normalize soon, with prices expected to fall, limiting the pass-through to import and consumer prices. However, uncertainty remains significant. The bank revised its 2026 inflation forecast down to 0.6% (from 0.8% in March) but increased projections for 2027 to 2.7% (from 2.0%). Inflation expectations for 2028 were little-changed at 3.4%.
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