The Riksbank reported that “inflation is approaching the target” of two percent, but added that “inflationary pressures are still somewhat high.”
Annual inflation in Sweden fell sharply in February and reached 4.5 percent. level. The bank’s benchmark index, adjusted for fixed interest rates (CPIF), reached 2.5 percent.
“It is possible that the interest rate set in the bank’s policy will be reduced in May or June, as long as the interest outlook remains favorable,” Riksbank said in a press release.
But the bank added that given how high inflation has been in recent years, its executive board “wants more evidence that inflation will stabilize and move closer to normal”.
In September, the central bank raised its interest rate to four percent, the highest level since 2008.
Many analysts had expected the bank to leave rates unchanged on Wednesday.
Bank “Swedbank” economists say they predict that interest rates will be cut in May, without waiting for the US and European central banks, which are expected to start reducing the cost of their loans in June.
They also added that they expect Sweden’s central bank to “further rapidly cut interest rates”, which could be cut three times this year.
The inflationary situation in Sweden was further aggravated by the fall in the exchange rate between the krona and the euro and the dollar and the resulting increase in import prices.
Sweden’s economic activity remains low, and the Riksbank predicts that it will only manage to grow by 0.3 percent this year. Meanwhile, 0.2 percent was recorded last year. economic contraction.
