Riksbanken Keeps Interest Rate Unchanged

On Wednesday, a new interest rate announcement was expected. Experts believed a rate cut was unlikely, but not impossible.

In June, Riksbanken lowered the policy rate to 2 percent, a reduction of 0.25 percentage points—the first since last winter.

At that time, they also indicated a "certain probability" of another rate cut this year, which would mean more money in the pockets of those with variable mortgages.

Increased Inflation a Major Reason

On Wednesday, all eyes were on the new interest rate announcement—and it turned out there would be no cut. "Inflation has risen more than expected over the summer and is now slightly above the target," Riksbanken stated in a press release.

According to the latest figures from SCB, inflation seems to have settled at three percent, while Riksbanken's target is two percent.

"Why Wait?"

However, much suggests that the high summer inflation is only temporary, Riksbanken wrote in its press release. They also announced that rate cuts might be considered—but later in the year.

Felicia Schön, a private economist at Avanza, believes the decision to keep the rate unchanged was expected—but sees it as "anxious."

"An unchanged rate was expected—but it confirms the view that Riksbanken is too focused on current inflation and does not want to risk acting too soon. But why wait? They themselves communicate that summer inflation is considered temporary, yet they are too anxious to act. The risk of overheating the economy due to a lower rate should be seen as minimal in this situation. It is rather the risk of a deeper recession than necessary that should be assessed and acted upon. Households need stimulation, and it is now," Schön wrote in an email.

Expected Decision

Several experts had predicted that the rate would not be cut in August.

"We believe that Riksbanken will keep the policy rate unchanged. They also have a rate path indicating their future intentions, and we still believe there will be a small opening for a cut this year, but not now," said Annika Winsth, chief economist at Nordea, before the announcement.

Other experts, however, thought there was a possibility that a long-awaited cut would come now, in August.

"We do not rule out a cut in August. But let's say there is a 30 percent probability and 60 percent probability that they will wait until September," said Robert Boije, chief economist at SBAB, earlier.

According to Nyhetsbyrån Direkt, all 13 respondents in Infront's survey predicted that the policy rate would remain unchanged at 2.00 percent in August. Several suggested that there is a greater chance the cut will come in September, or at least before the end of the year.