The Riksbank’s decision to maintain the repo rate at 1.75% signals a pause in monetary tightening after a rapid easing cycle. Since September 2024, the rate has fallen sharply from 3.25%, reflecting efforts to balance inflation control with growth support. This steady stance comes amid slowing inflation, moderate GDP growth, and external uncertainties.

Drivers this month

• Inflation eased to 3.10% YoY in October, down from 3.80% in August.
• GDP growth moderated to 0.30% QoQ in Q3 2025, below the 0.50% average of the past year.
• Unemployment remained stable at 6.70%, near the 12-month average.
• Global energy prices stabilized, reducing cost-push inflation pressures.
• Geopolitical tensions in Eastern Europe continued to weigh on trade confidence.

Policy pulse

The current 1.75% rate sits below the Riksbank’s estimated neutral rate of approximately 2.50%, indicating a mildly accommodative stance. This aligns with the bank’s inflation target of 2%, which inflation is approaching but has not yet sustainably reached. The pause suggests the Riksbank is monitoring incoming data before further adjustments.

Market lens

Immediate reaction: SEK/USD strengthened 0.30% within the first hour post-announcement, reflecting market relief at the steady rate. Short-term government bond yields fell by 5 basis points, signaling expectations of a prolonged pause.

Sweden’s core macroeconomic indicators provide context for the Riksbank’s steady rate decision. Inflation, growth, labor market conditions, and fiscal policy interplay to shape monetary policy.

Inflation trends

Consumer Price Index (CPI) inflation slowed to 3.10% YoY in October 2025, down from 3.80% in August and well below the 12-month average of 3.50%. Core inflation, excluding energy and food, held steady at 2.70%, indicating underlying price pressures remain moderate but persistent.

Growth and labor market

GDP growth decelerated to 0.30% QoQ in Q3 2025, compared to 0.50% in the previous two quarters. The labor market remains resilient with unemployment steady at 6.70%, close to the 6.50% average over the past year. Wage growth moderated to 2.80% YoY, easing inflationary wage pressures.

Fiscal policy & government budget

Sweden’s government budget remains broadly balanced, with a slight surplus of 0.20% of GDP projected for 2025. Fiscal policy is neutral to mildly supportive, with no major stimulus or austerity measures announced recently. This fiscal stance complements the Riksbank’s cautious monetary approach.

Monetary policy easing has coincided with a gradual decline in inflation and a moderation in growth. The repo rate cuts have helped stabilize inflation expectations, as seen in breakeven inflation rates falling from 2.80% to 2.30% over the past six months. Meanwhile, the SEK has appreciated by 4% against the euro since the last rate cut in September.

Market lens

Immediate reaction: Swedish krona (SEK) strengthened modestly, while 2-year government bond yields declined by 5 basis points, reflecting market confidence in the Riksbank’s steady stance.

Looking ahead, the Riksbank faces a complex environment balancing inflation risks, growth prospects, and external uncertainties. Three scenarios frame the outlook:

Bullish scenario (30% probability)

• Inflation falls below 2% sustainably by mid-2026.
• GDP growth accelerates to 0.60% QoQ, supported by stable global trade.
• Riksbank holds rates steady or cuts further to 1.50% by Q3 2026.

Base scenario (50% probability)

• Inflation hovers around 2.50% through 2026.
• Growth remains moderate at 0.30–0.40% QoQ.
• Riksbank maintains current rate until late 2026, then adjusts cautiously.

Bearish scenario (20% probability)

• Inflation rebounds above 3% due to wage pressures or energy shocks.
• Growth slows or contracts, risking stagflation.
• Riksbank reverses course, raising rates to 2.25% by mid-2026.

Policy pulse

Monetary policy is likely to remain data-dependent, with inflation trajectory and wage dynamics key to future decisions. The Riksbank’s cautious pause reflects uncertainty over external shocks and domestic demand.

The Riksbank’s November 2025 rate decision to hold at 1.75% underscores a balancing act amid easing inflation and moderate growth. The bank’s pause after a significant easing cycle reflects prudent risk management amid geopolitical tensions and uncertain global conditions. Financial markets responded positively, signaling confidence in the central bank’s forward guidance.

Looking forward, the interplay of wage growth, energy prices, and external demand will shape Sweden’s monetary path. The Riksbank’s steady hand aims to anchor inflation expectations while supporting a fragile recovery. Investors and policymakers should monitor incoming data closely for signs of inflationary rebound or growth slowdown.

Overall, the Riksbank’s decision aligns with a cautious but constructive macroeconomic outlook for Sweden in late 2025 and beyond.