Sweden’s Riksbank cuts interest rates and signals further easing ahead

Borrowing costs in Sweden are being lowered faster than previously predicted as inflation falls below target.

Sweden’s central bank cut its key interest rate a quarter-point to 3.25% on Wednesday as inflation now sits below the official target.

“Inflationary pressures have fallen over the year and are now assessed to be compatible with an inflation rate of around 2 per cent,” the Riksbank said in a statement.

“Low and stable inflation and falling interest rates are contributing to a recovery in the economy.”

Sweden’s CPIF rate of inflation came in at 1.2% in August, compared to the same period last year.

This is a decrease from the 1.7% year-on-year total recorded in July.

The Riksbank added on Monday that: “If the outlook for inflation and economic activity remains unchanged, the policy rate may also be cut at the two remaining monetary policy meetings this year.

“A cut of 0.5 percentage points is possible at one of these meetings.”

One or two further cuts may also be made during the first half of 2025, said the bank.