Swedish central bank keeps rates on hold at 1.75%, sees no change ahead

By Simon Johnson

STOCKHOLM, Jan 29 (Reuters) - Sweden's central bank kept its key interest rate at 1.75% on Thursday as widely expected and repeated its forecast that no change was likely for the rest of the year.

The central bank has been enjoying a rare "Goldilocks" moment where the economy is growing and inflation is close to the 2% target.

The Riksbank's main scenario is that the current benign conditions will continue and that the policy rate will be unchanged "for some time to come."

Nevertheless the outlook is finely balanced.

Geopolitical tensions are running high, growth could disappoint and inflation undershoot. But if the global picture brightens, GDP growth may accelerate.

"The uncertainty regarding the outlook for inflation and economic activity has increased," the Riksbank said in a statement.

"The Riksbank is vigilant with regard to developments and is prepared to adjust monetary policy if the outlook changes."

The Riksbank has cut rates eight times since spring 2024, most recently in September last year, in an effort to get wary consumers to start spending.

The economy has started to pick up and the government expects GDP growth of around 3.0% this year after 1.0% in 2025.

After being elevated through most of 2025, however, inflation is expected to cool, dropping well below the central bank's 2% target.

Analysts' main scenario is for no change in the policy rate until early 2027, when they expect a hike. However, another rate cut has not been completely ruled out.

"There are some tentative signs that the Riksbank ... is starting to see risks that inflation is becoming too low," Nordea economist Torbjorn Isaksson said in a note.

"We expect the Riksbank to stay on hold at 1.75% in 2026, with risks clearly tilted to a rate cut."

Capital Economics said the Riksbank would hike the policy rate in December this year.

The central bank will announce its next policy decision on March 19.