MNI Riksbank Review: June 2025 - Rate Path Shifts Lower

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Riksbank Review - 2025-06.pdf

EXECUTIVE SUMMARY: 

• The Riksbank cut rates by 25bp to 2.00% as widely expected. The June policy statement noted that “the economic recovery that began last year has lost momentum, and inflation is expected to be somewhat lower than in the previous forecast". As such, the June rate path was revised lower through the policy horizon.
• In the press conference, Governor Thedeen noted that inflation, wages and the krona were not posing upside risks to the rate outlook. As such, it made sense to lend a little more support to economic activity with another rate cut in June, following through on the slight dovish tilt made in May.
• The updated rate path assigns an average policy rate of 1.99% in Q3 and 1.92% in Q4. This is broadly in line with some of the analyst estimates we had seen ahead of the decision, and is consistent with a ~50% probability of one more 25bp cut in H2 2025. In the press conference, Governor Thedeen sought to play down the dovish signal from the front-end of the path, noting that is the “best assessment” of the outlook ahead and not a promise.
• However, the back-end of the rate path was also revised lower, a more dovish development relative to expectations. The “terminal” point of the rate path in Q1 2028 was 2.01%, well below the 2.25% level that had anchored long-end projections since the September 2024 decision.