SEK: Riksbank seen on hold with cautious hawkish bias – Commerzbank

Commerzbank's Antje Praefcke expects the the central bank of Sweden, Riksbank to leave its policy rate unchanged at 1.75% while reiterating its readiness to hike if needed. With Sweden’s growth outlook pressured by the Iran conflict and energy shock, but inflation still below target, the bank can wait. Markets already price a hike in the second half of 2026, which Commerzbank deems too ambitious for Swedish Krona (SEK).

Policy steady but readiness to hike maintained

"The Riksbank is expected to keep the policy rate on hold at 1.75% tomorrow and, as it did in March, to signal that it is prepared to raise the policy rate if necessary. After all, the longer the Iran conflict drags on, the bleaker Sweden’s growth prospects become. Consumer and business confidence have fallen in recent weeks, although the economy remains surprisingly resilient so far, despite weakening growth in Germany and geopolitical uncertainties."

"In March, the Riksbank signalled that interest rates would remain unchanged until the end of the year, although it had already raised its inflation forecasts for 2026 in the wake of the energy price shock - albeit to levels well below the 2% inflation target. For the time being, it is likely to stick to this view and continue to highlight the various possible scenarios that the war in Iran could bring, thereby emphasising its readiness to adjust the policy rate accordingly, as it did in March. However, a stronger commitment is unlikely, so the interest rate meeting should be fairly neutral for the SEK; after all, the market is already pricing in a potential rate hike in the second half of the year, which – much like expectations for the ECB – is likely to be too ambitious."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)