Sweden's Central Bank Pauses Easing Cycle with Quarter-Point Rate Cut

Stockholm, Feb. 16, 2025—Sweden's central bank, the Riksbank, has reduced its key interest rate by a quarter point to 2.25%, the lowest level in over two years. This decision marks a potential pause in the bank's easing campaign as policymakers assess the effectiveness of their previous actions.

Key Highlights:

* Riksbank cuts policy rate to 2.25%, meeting market expectations
* Majority of economists surveyed predicted the rate cut
* Forecast for one additional cut in early 2025 remains in place
* Uncertainty surrounding global economic developments and geopolitical tensions influences the decision
* Policymakers prioritize economic recovery over inflation concerns
* Swedish krona appreciates against the euro following rate announcement
* Analysts anticipate further krona gains due to easing cycle nearing its end

Policy Outlook

The Riksbank has signaled a cautious stance, indicating that it will monitor the impact of its recent rate cuts before making further adjustments. Governor Erik Thedeen emphasized that the 2.25% rate level could change based on incoming data and shifts in the macroeconomic outlook.

Economic Context

Consumer price growth has remained below the Riksbank's 2% target for an extended period, giving policymakers room to focus on supporting economic growth. Data suggests an improvement in economic activity and household spending. However, global economic uncertainties, particularly related to US and European policies, continue to influence the Riksbank's decision-making.

Impact on Markets

The Swedish krona initially weakened following the rate announcement but has since rebounded, trading higher against the euro. Analysts expect the krona to continue gaining value as optimism grows that the Riksbank's easing cycle is approaching its conclusion.

International Perspective

Sweden's monetary policy stance contrasts with that of the US Federal Reserve, which remains wary of inflation and may keep interest rates on hold. The Riksbank will closely monitor both the Fed's decision and the European Central Bank's expected quarter-point rate cut on Thursday, as global economic developments play a crucial role in shaping Sweden's monetary policy.