Sveriges Riksbank Holds Policy Rate Steady at 1.75%
Citing Global Uncertainty
On March 19, 2026, the Executive Board of Sveriges Riksbank announced its decision to hold the policy rate unchanged at 1.75 per cent. The central bank expects the rate to remain at this level for the foreseeable future, though it emphasized that the ongoing war in the Middle East has introduced significant uncertainty into its economic forecasts.
Key Points:
Policy Rate Remains Unchanged: The Executive Board concluded that maintaining the policy rate at 1.75 per cent represents a well-balanced monetary policy. This approach aims to strengthen the Swedish economy while guiding underlying inflation toward the target.
Geopolitical and Market Impacts: The conflict in the Middle East has driven major movements in energy prices and financial markets, leading to higher short-term interest rates and a stronger US dollar, which has appreciated against the Swedish krona.
Domestic Economic Outlook: Fundamentally, Sweden has favorable conditions for continued economic recovery. Recent data indicate that underlying inflation has been unexpectedly low. However, the central bank expects the Middle East war to slightly dampen near-term growth and temporarily push up CPIF inflation due to rising energy costs.
Inflation Timeline: The Riksbank expects underlying inflation to align with its 2 per cent target around the turn of the year. Overall CPIF inflation is projected to officially hit the target in 2029, once the temporary shocks from energy prices and VAT adjustments fade.
Vigilance and Future Adjustments: The Riksbank is closely monitoring developments and remains prepared to adjust the policy rate if the economic or inflationary outlook shifts.
Alternative Scenarios
While the Riksbank’s main scenario assumes the war will have only a moderate effect on inflation and recovery, it has prepared for two distinct alternative outcomes:
Higher Inflation: If the war causes a more severe and persistent rise in global inflation, the Riksbank warns it would have to raise the policy rate, even if it results in significantly lower economic activity.
Lower Demand: Alternatively, if the negative impacts on global demand are substantial and inflationary pressures weaken, the central bank would cut the policy rate to stimulate demand and stabilize inflation.
To address these developments, Riksbank Governor Erik Thedéen and Head of the Monetary Policy Department, Åsa Olli Segendorf, scheduled a press conference for the morning of March 19, 2026.