Riksbank Holds Policy Rate, Flags Rate-Hike Risk

• The Executive Board judged it well-balanced to leave the policy rate unchanged at present.
• The probability of a rate hike later this year has increased relative to the March assessment.
• The policy rate forecast was raised somewhat.
• Swedish inflation remains low.
• Supply disruptions linked to the Middle East war have lasted almost four months.

Decision

Sweden's Riksbank judged it well-balanced to leave the policy rate unchanged at present. The Executive Board raised its policy rate forecast somewhat. It said the probability of a rate hike later this year has increased relative to its March assessment.

Riksbank Holds Policy Rate, Flags Rate-Hike Risk

Inflation and Growth

Swedish inflation remains low. The Riksbank attributed the low level to the dampening effects of fiscal policy measures. Inflation abroad has risen.

Sweden's economy is running somewhat weaker than normal. First-quarter growth came in lower than expected. The Riksbank still expects growth to be higher this year than last year.

Household consumption continued to increase at a solid pace. Purchasing power has strengthened. Sweden's labour market recovery remains tentative.

Cost Pressures

Cost pressures on Swedish businesses have increased. Supply disruptions tied to the Middle East war have lasted almost four months. Their effect on inflationary pressures is rising.

The Strait of Hormuz remains tense, reducing the supply of oil products and pushing up energy and fuel prices. The disruptions are dampening economic development somewhat. The Riksbank's forecasts are based on oil futures prices.

Global Backdrop

The United States and Iran have announced a Memorandum of Understanding, according to a single report. The Riksbank flagged high equity valuations and unsustainably high public indebtedness as vulnerabilities in the global economy.

Policy Stance

The Riksbank said it remains highly prepared to adjust monetary policy.