Extended Riksbank Pause Seen Weighing on Swedish Krona

Key Moments

BBH Outlook on Riksbank Policy

Brown Brothers Harriman (BBH) projects that the Riksbank will maintain its policy rate at 1.75% for a sixth straight meeting. According to BBH, policymakers are expected to resist current market pricing that implies a 25 bps rate hike by the end of the year, a stance the firm views as weighing on the Swedish Krona (SEK).

Policy Path and Market Implications

BBH highlights that the Riksbank is “widely expected to keep the policy rate at 1.75% for a sixth consecutive meeting (Thursday).” The firm adds: “We expect the Riksbank to lean against market pricing for a 25bps hike by year-end which is a headwind for SEK.”

The bank further notes that the forthcoming Riksbank projections are likely to maintain a steady-rate outlook through Q4 2026. At the same time, BBH expects a possible adjustment in the projected start of rate hikes, with the first full 25 bps increase potentially moved forward to late 2027 from Q1 2028.

Inflation Backdrop Supports Extended Hold

BBH attributes the likely extended period of unchanged rates to Sweden’s current macroeconomic conditions. “The updated Riksbank forecast is likely to continue signaling no change in rates through Q4 2026, though it may bring forward the first full 25bps hike to late 2027 from Q1 2028. Sweden’s benign inflation backdrop alongside ample spare capacity in the economy argue for an extended Riksbank hold.”

Policy Rate and Forecast Timeline