MNI RIKSBANK WATCH: Holds In Aug, Door Open To Further '25 Cut

The Riksbank Executive Board left its policy rate at 2.0% at its August, as widely expected, and stuck to guidance which leaves the door open to another cut this year without providing a clear steer to a specific meeting.

Analysts and markets' focus ahead of the meeting was on the guidance and on the central bank's interpretation of recent strong inflation and weak growth data. In the Board's Monetary Policy Update it took the view that both the elevated inflation and the soft growth were due to temporary factors.

The August meeting was an interim one, with the next quarterly forecast round coming in September and with the June rate path giving a roughly 50/50 chance of a September cut. The Board said that it "still sees some probability of a further interest rate cut this year" but provided no further clarity on timing.

It said that the high summer inflation numbers could largely be explained by pricing in volatile sectors such as foreign travel and car rentals and that prices for other goods and services had been in line with the Riksbank's forecast. 

SLUGGISH RECOVERY

While it noted the weakness in economic activity data and said that the expected recovery had been sluggish, there were "favourable conditions for stronger economic activity going forward, partly due to the Riksbank's interest rate cuts and to rising real
wages for households" and that business confidence had returned to normal levels.

The EU-U.S. tariff agreement, with 15% U.S. tariffs, was also described as being in line with the Riksbank's assumptions, and it said that "the effects are so far rather small." 

Economic uncertainty indicators, though they have declined, were still seen as elevated, while the krona, despite some recent softening after being the strongest performing G7 currency in 2025, was still considered to be exerting a disinflationary effect. (See MNI INTERVIEW: Risk Of Strong Krona, Weak GDP - Riksbank Head)

"Despite some weakening during the summer, the development of the krona is expected to have a dampening effect on inflation," the board said.