MNI RIKSBANK WATCH: Holds Policy Rate, Says Could Ease Later

The Riksbank left its policy rate unchanged at 2.25% as expected on Thursday, and slightly modified its guidance to say that with policy "well balanced" it would wait for further data to clarify the outlook but could ease policy later. 

There were no new forecasts for the May meeting, and the Executive Board said it was somewhat more likely that inflation would come in below rather than above its March projections, which "could suggest a slight easing of monetary policy going forward." March’s rate path had showed 2.25% as the trough and the policy rate running near flat throughout the three-year forecast. 

Many analysts and market pricing point to a lower policy rate, with either one or two more cuts this year. May's decision was, at the margins, supportive of this view.

"Developments abroad mean that the economic outlook in Sweden looks slightly weaker than in the March forecast," the Riksbank stated.

Recent elevated inflation was likely to be temporary and growth prospects have weakened in the U.S. and Europe in the Riksbank's view, with the U.S. likely to see higher inflation as a result of its tariff policy "while in Europe lower demand may put downward pressure on inflation." (See MNI INTERVIEW: Riksbank Eyes Inflation Expectations - Jansson)

The analysis stressed the uncertainty of the outlook, however, and the June forecast round will provide an opportunity for the central bank to look in more depth at the impact of recent events on the export-intensive Swedish economy.

"Anecdotal information suggests increased pessimism among companies [but] it is still too early to determine the extent and duration of the effects on economic activity," the Riksbank said.