Riksbank Cuts Interest Rate, Economic Forecasts Downgraded
Riksbank cuts interest rates to 2.0%, revises GDP growth down to 1.2%, causing the krona to weaken significantly.
Key Points
- • Riksbank cuts policy interest rate to 2.0%.
- • GDP growth forecast downgraded from 1.9% to 1.2%.
- • Swedish krona weakened sharply post-announcement.
- • Major banks expect further rate cuts in the fall.
On June 19, 2025, the Riksbank announced a significant cut to the policy interest rate, lowering it to 2.0%. This move was accompanied by a downward revision of Sweden's GDP growth forecast from 1.9% to 1.2% for the year. Following the announcement, the Swedish krona weakened sharply, trading at approximately 9.68 SEK against the USD and 11.09 SEK against the EUR, marking a significant slide in value after the decision.
The abrupt shift in monetary policy has led to an uncertain outlook for the Swedish economy, with major banks such as Swedbank, Handelsbanken, and SEB now anticipating further rate cuts in the fall. The Riksbank's leadership continues to assert that the measures will not have long-term negative effects on the economy, despite contrasting predictions from the Economic Institute, which has lowered its forecasts through 2028.
Market reactions have reflected apprehension across international financial scenery; Asian stock markets fell following the Riksbank’s rate cut, although the Stockholm stock exchange remained relatively stable. In the USA, markets also showed weakness, with the S&P 500 dipping by 0.03% and the Nasdaq 100 remaining unchanged.
Despite the effects of the interest rate cut, Riksbank officials maintain optimism, suggesting that inflation is expected to remain below 2%, which they believe will mitigate potential negative impacts for households with variable-rate mortgages. Current gold prices have steadied at 1,043 SEK per gram amidst these economic shifts.
In summary, the Riksbank's strategy is aimed at stimulating growth in a slowing economy, and while the immediate response has been market apprehension and a weaker currency, the central bank is committed to maintaining inflation under control, which could provide relief to Swedish households moving forward.