Swedish central bank cuts key rate to 2.00%, may ease again this year
By Simon Johnson
STOCKHOLM, June 18 (Reuters) - Sweden's central bank cut its key interest rate to 2.00% from 2.25% as expected on Wednesday and said that, with price pressures weak, it may ease further before the end of the year to boost sluggish growth.
Uncertainty surrounding U.S. President Donald Trump's erratic tariff policies has hit business and household sentiment, squeezing growth . The Riksbank has reactivated an easing cycle that had appeared over at the start of this year.
"The economic recovery that began last year has lost momentum, and inflation is expected to be somewhat lower than in the previous forecast," the Riksbank said in a statement.
"The forecast for the policy rate entails some probability of another cut this year."
Swedbank said it expected the economy to remain weak over the summer.
"The Riksbank therefore will cut the policy rate again in September to 1.75%," the bank said in a note.
"Today's communication indicates lower tolerance for economic underperformance and hence increases the likelihood of further monetary policy easing beyond September."
The Swedish crown eased against the euro after the decision. EURSEK=D3
SLOW RECOVERY
The central bank last cut the policy rate in February, but flagged in May, when rates were held unchanged, that easier policy could be justified in the months ahead if inflation remained tame.
The latest figures showed only mild price pressure, and the overwhelming majority of analysts in a Reuters poll expected a rate cut.
The median forecast in the poll had been for no further change after a June cut, though a minority of analysts expected rates would end the year at 1.75%.
Gross domestic product shrank 0.2% in the three months through March on an quarterly basis. Earlier this week, think tank NIER forecast growth of just 0.9% in 2025.
"There are favourable conditions for stronger economic activity in Sweden going forward. However, the recovery is proceeding more slowly than expected," the Riksbank said.
Neighbour Norway's central bank is expected to keep its policy interest rate unchanged on Thursday at a 17-year high, a Reuters poll of economists showed this week.
The Riksbank will deliver its next scheduled rate decision on August 20.
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