The USD/SEK currency pair rebounded from a fresh low of 8.8472, its weakest level since November 18th 2021, on Tuesday ahead of the outcome of the Federal Reserve’s and Sweden’s Riksbank policy meetings.
The Fed is widely expected to keep its federal funds rate target range intact at 3.50%-3.75% at its January 27th-28th meeting.
Investors will also be paying close attention to the press conference with Fed Chair Jerome Powell.
The minutes from the Fed’s December policy meeting showed that officials judged rate cuts were likely to be appropriate in 2026 in case inflation subsides over time.
Yet, policy makers were divided in their assessment of risks between higher inflation and unemployment. Some FOMC members expressed greater concern that inflation becoming entrenched could require higher interest rates. Other policy makers favored a greater magnitude of rate cuts to rein in signs of a softening labor market.
At the same time, Fed Chair Jerome Powell has not offered any guidance on the timing of the next rate cut.
The FOMC signaled just one 25 bps rate cut for this year, while investors continue to expect at least two rate cuts.
Meanwhile, Sweden’s Riksbank is expected to leave its key policy rate intact at 1.75% at its January 29th meeting.
In December, policy makers again indicated that borrowing costs would likely remain at this level for some time.
The Riksbank also noted that economic prospects had improved, while inflation was approaching the 2% target.
Sweden’s annual consumer inflation has remained stable at 0.3% in December, the lowest rate since May, the latest data showed.
And, Sweden’s consumer price index with a fixed interest rate (CPIF), Riksbank’s target variable for inflation, went up 2.1% year-on-year in December.
The USD/SEK currency pair was last flat on the day to trade at 8.9136.
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