Riksbank Holds Rates at 2% Amid Inflation & Weak Growth

The Swedish Riksbank kept its key policy rate unchanged at 2% in August 2025, a decision that was broadly expected as the central bank seeks to strike a balance between easing inflationary pressures and supporting a fragile economy.

Inflation Pressures Remain Elevated

Although Sweden’s inflation has ticked slightly above the 2% target, the Riksbank emphasized that the increase is temporary and largely due to short-lived factors such as volatile energy prices and external shocks. Policymakers expect inflation to ease in the coming quarters as demand remains muted.

Growth Still Weak

The central bank highlighted ongoing challenges for the domestic economy:

• Household consumption remains subdued.
• The labour market shows only limited signs of improvement.
• Business investment continues to lag behind pre-pandemic trends.

Rising real wages and the effect of earlier rate cuts could help boost activity in the second half of the year, but officials expect the recovery to remain modest.

Global Headwinds Add Uncertainty

International factors continue to weigh on Sweden’s open economy. Negotiations over U.S. trade policy, heightened geopolitical risks, and fluctuating global energy prices have added volatility to inflation, though the Riksbank believes these shocks are unlikely to derail the medium-term stabilization path.

Policy Outlook

The Bank reiterated that its overall outlook has not changed significantly since June. While leaving rates steady for now, officials noted they remain ready to cut further if inflation eases and economic weakness persists. The decision reflects what the Riksbank called a “careful balance” between containing price pressures and ensuring sufficient support for growth.

Source: Riksbank Press Release