Riksbank expected to cut rate to 2% in June, say Nordea economists

Riksbank expected to cut rate to 2% in June, say Nordea economists

Stockholm - The Riksbank is anticipated to lower its policy rate to 2% in June, according to Nordea economists. This forecast is based on recent economic data indicating that inflation is below forecasts, raising hopes for a rate cut.

Swedish inflation in May was 0.1% month-over-month and 2.3% year-over-year, according to the statistics office (SCB). Excluding volatile energy prices, inflation stood at 2.5% year-over-year and 0.2% month-over-month. The Riksbank targets a 2% inflation rate.

"Our forecast is that the Riksbank will stay on hold at 2.25% in June, but the surprisingly low inflation and sluggish GDP growth increases the probability for a rate cut," said Nordea economist Torbjorn Isaksson [1].

The central bank will publish its next monetary policy decision on June 18. In May, it held its key rate unchanged at 2.25%, but indicated that lower growth this year could open the door to a cut, assuming that the outlook for inflation remains benign.

The economy shrank in the first quarter due to uncertainty around U.S. tariffs, affecting business investment and household spending. The government expects GDP growth of 1.8% this year [1].

Analysts in a Reuters poll had forecast headline inflation of 2.5% on an annual basis and 0.3% compared to the previous month. Ex-energy inflation was seen at 2.6% and 0.3% respectively [1].

References:
[1] https://uk.finance.yahoo.com/news/swedish-flash-inflation-below-forecast-065040577.html