Riksbank policy rate: Forecasts and Trade-Offs

Riksbank policy rate forecasts over time

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On that basis, there’s little reason to doubt that the Riksbank will go ahead with another rate hike at its September meeting. But ultimately Swedish policymakers face a growing trade-off between hiking to bolster its ailing currency, and avoiding a deeper correction in the housing market. Sweden has a much higher share of variable rate mortgages than its peers across Europe, and that means the pass-through from higher rates has been more rapid.

That said, the Riksbank is forecasting another 7% fall in house prices, on top of the 15% we’ve already seen from the peak. In other words, some further pain is already baked into its latest rates projection.

In short, we expect a rate hike in September, but if the Fed and ECB have paused rate hikes by the fourth quarter, then the Riksbank might be content with keeping rates on hold in November.