Riksbank's Thedeen: Latest data suggest recovery continuing

Riksbank's Thedeen: Latest data suggest recovery continuing

Riksbank’s Thedéen: Latest Data Suggest Recovery Continuing

The Riksbank has maintained its policy rate at 1.75% amid signs of a gradual economic recovery in Sweden, with inflation nearing its 2% target. The central bank’s Executive Board emphasized that while economic activity remains below pre-pandemic levels, growth has outpaced earlier forecasts, and labor market conditions are showing tentative improvement.

Recent data indicate that Sweden’s GDP growth for 2025 is projected at 1.5%, with stronger-than-expected performance in late 2025 and early 2026. The Riksbank’s projections suggest annual GDP growth of 2.9% in 2026 and 2.5% in 2027, reflecting a cautious optimism about domestic demand and structural reforms. Unemployment, currently at 8.8%, is expected to decline steadily, reaching 7.5% by late 2028. However, the central bank cautioned that risks—both domestic and global—remain, including geopolitical tensions, uncertain fiscal policy impacts, and volatile household consumption patterns.

Inflation, which approached 2% in recent months, is projected to stabilize near the target over the medium term. The Riksbank noted that CPI inflation for 2026 is forecast at 0.6%, aligning with its long-term goals. Governor Erik Thedéen highlighted the importance of inflation targeting in maintaining economic stability, stressing that central bank independence and transparency are critical to sustaining public confidence in monetary policy.

Thedéen also reiterated that while exchange rate fluctuations are challenging to manage, the Riksbank remains committed to prioritizing inflation control over short-term currency movements. "In normal times, central banks must steel themselves against short-term volatility," he stated, underscoring the need for clear communication and adaptive policy frameworks.

The policy rate is expected to remain at 1.75% through early 2026, with adjustments contingent on evolving economic conditions. The Riksbank will closely monitor risks to its inflation and growth outlook, including global financial market dynamics and domestic fiscal developments.

Sources: Riksbank press releases and speeches (https://www.riksbank.se/en-gb/press-and-published/notices-and-press-releases/press-releases/2025/policy-rate-unchanged-at-12.75-per-cent)(https://www.riksbank.se/en-gb/press-and-published/speeches-and-presentations/2025/thedeen-inflation-targeting--an-important-contribution-to-economic-stability/).