The Riksbank, Sweden's central bank, has reduced its key interest rate by 0.25 percentage points to 2.50%. This decision, made public on December 19, follows five rate cuts this year and reflects a cautious shift as the bank prepares for 2025.
Sweden's economy has faced stagnation over the past two years, following previous rate hikes aimed at curbing inflation, which peaked at around 10% in late 2022. The central bank began its current rate reductions in May, with inflation now falling below the 2% target.
Despite the decrease in inflation, consumer and business spending remain subdued, with a slight uptick in inflation noted in recent months. The Riksbank indicated that if inflation and economic activity remain stable, another rate cut could occur in the first half of 2025.
This latest move follows a significant 0.5 percentage point cut in November, with forecasts suggesting further reductions could follow in early 2025.
The bank emphasized the need for a cautious approach, stating, 'The interest rate has been reduced rapidly and monetary policy affects the economy with a lag.' Following the announcement, the Swedish crown strengthened against other currencies.