MNI RIKSBANK WATCH: Seen On Hold, Geopolitics Centre Stage

The Riksbank is expected to leave its policy rate at 1.75% at its Jan 29 meeting and to restate guidance that the rate is “expected to remain at this level for some time to come.”

As there will be no new forecasts this month, the focus will be on the brief, updated economic analysis and the press conference with Governor Erik Thedeen. Analysts disagree over whether the next move is more likely to be a hike or a cut.

“The signals from the Swedish economy are positive, with inflation close to our target and growth having started to pick up," Thedeen said in a recent speech in Stockholm, adding that there seems to be no compelling reason for it to switch from the flat-for-long policy stance.  

Minutes of the Dec 18 meeting showed differences among the voting members of the committee, who have numbered four since October. 

"My concern about the risks to inflationary pressures going forward continues to be that they rather will be too low than too high," Deputy Governor Per Jansson said at the meeting. (See MNI INTERVIEW: Higher Bar To Future Riksbank QE - Thedeen)

However, as growth has begun to pick up, Deputy Governor Aino Bunge said she was "more assured now that we have cut the policy rate enough for this interest rate cycle." 

The December forecast showed the projected policy rate path troughing at 1.75% and edging up to 2.12% in three years' time.

The Bank’s growth forecast is 2.9% in 2026 and 2.5% in 2027, while it projects the target CPIF inflation measure will undershoot at just 0.9% this year.

Topics at the press conference are likely to include geopolitical risks. The Riksbank's tariff impact assessments have regained prominence after the U.S. administration’s recent, now ditched, threat to impose 10% tariffs on Sweden over its support for Greenland.

"It is not difficult to find reasons why developments might take a completely different turn to what we believe and hope for," Thedeen said in his speech.