STOCKHOLM (Reuters) -Sweden’s central bank kept its policy rate unchanged at 2.25% as expected on Thursday as it weighed up a still sluggish domestic economy and the risks posed by signs of resurgent inflation and brewing global trade tensions.
The Riksbank has cut its key rate six times since spring last year as inflation has eased back from a peak of over 10% in late 2022.
It cut last in January when it said that it had probably done enough to boost a sluggish economy. Inflation outcomes since then have come in above expectations and well above the 2% inflation target.
“The Executive Board has decided to hold the policy rate unchanged at 2.25 per cent and assesses that the rate will remain at this level going forward,” the central bank said in a statement.
“The Riksbank monitors developments closely and will act if the outlook for inflation and economic activity so requires.”
The Riksbank said it expected inflation between 2 and 3 per cent this year, but that price pressures would then ease heading into next year.
Analysts had unanimously predicted no change in rates but had been divided over the direction of policy ahead reflecting uncertainty about U.S. trade policy, the war in Ukraine, Germany’s expansionary fiscal plans and how to interpret what they mean for inflation and growth.
For the Riksbank, that means it is likely to be wary of sudden moves that it might have to reverse in short order.
The Federal Reserve in the United States, the Bank of England and the Swiss National Bank are all due to announce policy decisions this week. On Wednesday, the Bank of Japan held its key rate unchanged and warned of heightened uncertainty.
(Reporting by Simon Johnson, Niklas Pollard, Anna Ringstrom and Johan Ahlander in Stockholm, Terje Solsvik in Oslo; editing by Niklas Pollard)
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