Riksbank holds policy rate in January

Latest bank decision: At its meeting on 29 January, the Riksbank decided to leave the policy rate unchanged at 1.75%. The hold followed a total of 225 basis points in cuts since May 2024 and aligned with market expectations.

Low inflation and heightened geopolitical tensions underpinned decision: On the one hand, a rate hike was not warranted given that domestic inflation has fallen well below the central bank's 2% target in recent months. On the other hand, solid economic growth and rising household consumption toward the end of last year meant a rate cut wasn’t required either. Heightened geopolitical tension also influenced the bank's decision to take a wait-and-see approach.

Rates to remain stable ahead: The Riksbank suggested the policy rate will remain unchanged "for some time to come," but it acknowledged greater uncertainty around inflation and growth. Our consensus, shared by all panelists, anticipates rate stability in the first half of the year. Beyond that, some panelists expect a 25-basis-point increase in the second half of the year.

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