RIKSBANK
The Riksbank December Monetary Policy Report notes that the baseline policy rate path does “not make any explicit assumptions about the imposition of tariffs”. However, the MPR includes a section discussing the “Macroeconomic effects of higher US import tariffs” and an alternative scenario which assumes “that the United States introduces tariffs of 20 per cent on all imports and that the rest of the world responds with import tariffs of the same magnitude on all US goods”
- “The tariffs lead to an inefficient allocation of resources, making productivity and ultimately GDP lower. However, they also lead to higher import prices, further restraining demand in the economy”
- “In the scenario, the policy rate only rises moderately. The higher inflation is of a temporary nature and must be balanced against weaker real economic growth and lower inflationary pressures further in the future”.
- The Riksbank also runs a second “hawkish” alternative scenario whereby “the trade conflict also has spillover effects in the form of exacerbated geopolitical tensions”.
- In this scenario, “the policy rate is raised to help bring inflation back on target and to counteract the tendencies towards secondary effects”.
- Finally, the customary “dovish” scenario looks at the case where demand is lower than expected, thus inflation pressures are reduced. The policy rate troughs at 1.36% in Q3 2026 in this scenario (i.e. below the neutral range).
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