MNI Riksbank Preview - May 2025: Scope For Dovish Tilt

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Riksbank Preview - 2025-05.pdf

EXECUTIVE SUMMARY: 

• The Riksbank is expected to keep rates on hold at 2.25% on May 8. Although the May decision does not include an updated set of macroeconomic forecasts and rate path projection, we still think there is scope to open the door to another rate cut later this year, conditional on downside growth risks materialising.
• In March, the Riksbank held rates at 2.25% and assessed that rates will likely “remain at this level going forward” – a view supported by the latest rate path projection. However, the policy statement and subsequent speeches from Executive Board officials have highlighted that the Riksbank is ready to act “if the outlook for inflation and economic activity so requires”.
• The direct impact and associated uncertainty of US tariffs leaves growth risks tilted to the downside, while the inflation outlook has steadied a little over the last month. There’s little reason to move rates to 2.00% at this meeting given the uncertain outlook, but we think the case for a June cut is firmly in play if hard data released in May/early June disappoints.
• Analysts are unanimous in forecasting no change in policy rates in May, while there is more uncertainty around whether the guidance will see a dovish tweak. Risks to the policy rate are clearly skewed to the downside though, with 4/14 analyst previews we have seen expecting a terminal rate of 1.75% (2 more 25bp cuts) and 4/14 expecting 2.00% (one more 25bp cut).