Riksbank holds, but keeps tightening in play
The Riksbank’s decision is best read as a cautious hawkish hold.
It left the policy rate unchanged at 1.75%, as expected. The message is more hawkish than current inflation suggests. The Bank is insuring against second-round effects from a prolonged energy shock rather than responding to an existing domestic inflation problem.
The domestic data do not justify a hike. The Riksbank cut its 2026 CPIF forecast from 1.5% to 1.1%, reduced GDP growth from 2.5% to 2.2%, and raised unemployment from 8.4% to 8.6%. CPIF excluding energy stood at 0.5% YoY in May, while GDP contracted by 0.2% QoQ in the first quarter.
Growth is weaker, unemployment is higher, and underlying inflation remains low.
The complication is that temporary fiscal measures are suppressing inflation. The Riksbank estimates they lowered May CPIF by just over one percentage point. Adjusted for these effects, CPIF was around 2.4%, while CPIF excluding energy was around 1.4%. That helps explain why the Bank remains concerned about inflation risks despite weaker headline readings.
The press conference clarified the concern. The Riksbank is not saying inflation is high today. It is saying inflation pressure may be building beneath the surface.
Business surveys show some firms absorbing higher costs, while others are passing them on to consumers. If higher energy, transport and input costs feed into prices and later wages, the supply shock could become a persistent inflation problem. That explains the higher rate path. The new forecast places the policy rate at 1.82% in Q4 2026, compared with 1.77% in March, and at 1.89% in Q1 2027. The baseline assumes oil supply normalises, limiting the inflation impact. However, the disruption has already lasted almost four months, increasing the risk that firms change pricing behaviour before the shock fades.
The main caveat is timing. The forecasts were based on information available on June 11 and do not incorporate the subsequent US-Iran Memorandum of Understanding.
If the agreement is implemented and the Strait of Hormuz reopens, energy prices should fall further, and the case for a 2026 hike would weaken.
The decision reflects concern about where inflation may be heading, not where inflation is today.
For SEK, the hold offered little new information because it was fully priced. Markets focused on the Riksbank’s warning about future inflation pressure rather than weaker inflation and growth forecasts. The higher rate path supports SEK at the margin, but weak growth and geopolitical de-escalation limit the upside. A sustained fall in energy prices would reduce SEK rate support, while renewed supply disruption or broader pass-through would reinforce the Riksbank’s hawkish bias.