Riksbank cut rates three times in turbulent 2025
Erik Thedéen, Governor of the Riksbank, presented an account of monetary policy in 2025 to the Committee on Finance. He detailed a year marked by tariff turbulence, temporary inflation, and three policy rate cuts.
Navigating 2025's economic shifts
The year 2025 was marked by significant global and domestic economic shifts, as detailed by Governor Erik Thedéen.
Monetary policy navigated three distinct phases: a calm start, followed by a period of tariff turbulence, and finally, greater clarity towards the year-end.
Despite elevated inflation at the beginning of 2025, which was largely attributed to transitory factors, underlying inflationary pressures remained consistent with the Riksbank's target.
The Swedish krona strengthened throughout the year, particularly against the dollar, potentially due to decreased interest in US assets and increased interest in Swedish assets.
In response to these dynamics, the Riksbank gradually eased its monetary policy, implementing three policy rate cuts.
The policy rate was reduced to 1.75 percent by the end of the year, reflecting a forward-looking approach to support economic recovery.
Independence and fiscal prudence
The economic picture evolved, showing low household confidence and a weak labour market, with stable unemployment and employment rates.
The Riksbank's forward-looking monetary policy aimed for target fulfilment, cutting the policy rate to support recovery and ensure inflation reached its target beyond the near term.
Long-term inflation expectations remained stable.
Governor Thedéen also underscored the increased focus on central bank independence, noting strong support for the Riksbank's autonomous decision-making.
He emphasized the importance of Sweden's robust public finances, especially given high public debt globally, advocating for continued sound management.