Sveriges Riksbank: Year-Month Monetary Policy Decision, Policy Rate Decision (..)

Key Chapter Title List

1. Policy Rate Decision
2. Basis for the Decision
3. Legal Basis
4. Policy Rate Maintained at 2.25%
5. Executive Board Members
6. Personnel Involved in Final Processing

Document Introduction

This document is an annex to the minutes of the monetary policy meeting held by the Executive Board of Sveriges Riksbank on May 7, 2025. Its core content is the announcement of the decision to maintain the policy rate unchanged at 2.25%, and it elaborates on the legal foundation and economic considerations for this decision. This resolution will officially take effect on May 14, 2025.

The document clearly states that the Riksbank's primary statutory objective is to maintain low and stable inflation, i.e., the price stability target, specifically defined as the annual growth rate of the Consumer Price Index with a fixed interest rate (CPIF) reaching 2%. Without compromising the price stability objective, the Riksbank must also support balanced economic development in terms of production and employment. The policy rate is the Riksbank's main tool for achieving this objective.

The decision is based on an assessment of the current complex economic situation. From the start of the rate-cutting cycle in May 2024 to January 2025, the policy rate was reduced from 4% to 2.25%, and at the March 2025 meeting, the decision was made for the first time to keep it unchanged. Since the March meeting, global uncertainties have intensified, particularly changes in US trade policy, which have triggered significant volatility in financial markets and led to a deterioration in the growth outlook for both Europe and the US. The US tariff increases are expected to push up domestic inflation there, while weak demand in Europe may dampen inflation. The Riksbank assesses that Sweden's economic outlook is slightly weaker than forecast in March, and inflation has risen somewhat at the beginning of the year, but new information supports the March forecast judgment that "the higher inflation this year is temporary."

The Riksbank further analyzes that a weaker economic outlook implies that inflation may be lower in the short term, and the probability of inflation being lower than the March forecast is slightly higher than it being higher. This situation may imply some scope for a slightly more accommodative monetary policy in the future. However, the Riksbank considers that current monetary policy is in a "good balance," and the wise course is to wait for more information to gain a clearer picture of economic activity and the inflation outlook. Considering the impact on the functioning of the real economy and financial markets, the Riksbank judges that maintaining the policy rate at 2.25% is appropriate in the current environment. This decision also complies with the requirement for proportionality in the Sveriges Riksbank Act.

This resolution was made by the Executive Board (Governor Erik Thedéen, First Deputy Governor Anna Breman, and Deputy Governors Per Jansson, Aino Bunge, Anna Seim) after hearing reports from advisors. Personnel from the Monetary Policy Department and the Office of the General Counsel were involved in the final processing. The full monetary policy assessment is detailed in the attached document "Monetary Policy Update."