Swedish Central Bank Cuts Interest Rates, Signals Caution for 2025

Investing.com -- Sweden's central bank, Riksbank, has lowered its key interest rate by a quarter of a percentage point to 2.50%. This decision, announced on Thursday, is in line with expectations. However, the bank, which has implemented five rate cuts this year, has signaled that it will adopt a more cautious stance as it heads into 2025.

The Swedish economy has been stagnant for the past two years following the period when Riksbank raised interest rates to combat rising inflation. Inflation peaked at around 10% by the end of 2022. In May, the central bank began to decrease interest rates again, and since then, inflation has fallen below the 2% target.

Despite this, consumer and business spending remain constrained, and inflation has shown a slight increase in recent months. Riksbank stated, "If the inflation and economic activity outlook does not change, the policy rate could be lowered once again in the first half of 2025."

This remark follows a larger-than-usual half-point cut made in November, during which rate setters had anticipated another cut in December and one or two more in the first half of 2025.

On Thursday, the bank explained its cautious approach: "The interest rate has been reduced rapidly, and monetary policy affects the economy with a lag. This situation necessitates a more prudent approach when formulating future monetary policy."

Following the announcement, the Swedish krona appreciated in value.