Riksbank Cuts Policy Rate By 25 Bps, Signals More Reductions Ahead

(RTTNews) - Sweden's central bank lowered its key policy rate by a quarter-point as inflation continued to ease amid weakening growth prospects, and signaled as much as three more interest reductions this year.

The Executive Board of Riksbank decided to cut the policy rate by 25 basis points to 3.50 percent. The outcome of the meeting matched expectations.

Previously, the bank had lowered its policy rate in May, which was the first cut since February 2016. The bank had ended its policy tightening cycle in September 2023 with a quarter point hike.

"If the inflation outlook remains the same, the policy rate can be cut two or three more times this year, which is somewhat faster than the Executive Board assessed in June," the bank said in a statement.

The board observed that the risk of inflation becoming too high again has declined significantly. Moreover, growth outlook was somewhat weaker than in the previous forecast.

The board assessed that that the policy rate can be reduced somewhat faster than was assessed in June. Nonetheless, the board cautioned about the uncertainty surrounding the outlook for inflation and economic activity.

Capital Economics' economist Adrian Prettejohn said as there is only a limited amount of significant economic data being released before the Riksbank's next meeting in just one month's time, a further rate cut is essentially baked in.

On top of that, the economist expects a rate cut at each of the remaining meetings this year.