MNI Riksbank Preview: May 2026 - Favourable Starting Point

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EXECUTIVE SUMMARY: 

• The Riksbank is expected to hold the policy rate at 1.75% on Thursday, while reiterating a patient but vigilant stance with respect to upside inflation risks. We think the Board will have enough confidence to note that the rate is expected to “remain at this level for some time to come”, with the June decision (where an updated rate path forecast and MPR will be presented) a more appropriate time to consider any revisions.
• Domestic economic developments since the March decision have reinforced our view that, absent the Iran war, the Riksbank may have needed to cut rates in H1 2026. In the current environment, that suggests that the bar to hiking is higher for the Riksbank than the ECB. 
• That doesn’t mean a small adjustment later this year can be ruled out, though. We think the March MPR commentary was fairly explicit that if the Board gains confidence that the stagflationary scenario could be playing out, it won’t hesitate to raise rates.
• A no-hike “option” is also still in play if a durable Iran war ceasefire deal is reached and the Strait of Hormuz is reopened in the near future.