MNI RIKSBANK WATCH: On Hold, Sees First Cut In May Or June

The Riksbank left its policy rate on hold at 4.0% at its March meeting and said it could make its first cycle cut in either May or June, as policymakers take account of the interplay between the exchange rate and European Central Bank monetary policy.

Announcing the policy decision, the Riksbank said if the inflation prospects "remain favourable, the policy rate may well be cut in May or June," making the case for "gradual cuts in the policy rate." The Swedish central bank's board remains concerned about potential krona weakness or fresh adverse geo-political developments driving inflation up again.

Its policy rate path showed that after the first cut there will only be another five at most over the next three years, with the forecast rate at 2.6% in three years' time. Inflation on the target CPIF measure, CPI with a fixed interest rate, was shown just above target this year and just below in 2025 with GDP growth rebounding from 0.3% in 2024 to 1.9% in 2025.

The Swedish central bank chief told MNI in an interview that ECB signalling, which currently points to a likely cut in June, could have a spillover effect for the krona, playing into the decision over whether to cut in May or June. (See MNI INTERVIEW: Krona A Factor In Riksbank Cut Timing - Thedeen)