Nordea economists Kjetil Olsen and Sara Midtgaard expect the Sweden’s central bank, Riksbank to leave its policy rate at 1.75% on 19 March and through 2026, as inflation forecasts are only modestly revised and uncertainty over energy prices is high. The war in the Middle East has shifted the risk balance from clear rate-cut bias to a more neutral stance.
War-driven uncertainty delays rate moves
“Revisions to the inflation forecasts are so far modest. However, uncertainty as for energy prices remains pronounced. In the near term, the bank is likely to stay sidelined, while stressing that it is ready to act.”
“But the situation is uncertain and could change rapidly. This uncertainty is likely to lead the Riksbank to adopt a wait-and-see approach at its meeting on 19 March. We expect the policy rate to be left unchanged at 1.75%, and the rate path to remain intact from the December report, implying an unchanged policy rate throughout most of 2026.”
“In response to the war in the Middle East, we have raised our forecast for CPIF inflation by around 0.5 percentage points. This brings our CPIF path into line with the Riksbank’s assessment from December.”
“The risk balance in the assessment of the policy rate has shifted, from a clear probability of a rate cut to a more balanced risk profile. Timing is key. The longer the conflict persists, the greater the likelihood of a rate hike.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/riksbank-war-risk-keeps-policy-on-hold-nordea-202603161456
