Riksbank Seen Lagging ECB with Lower Interest Rate Path

Nomura strategists expect Sweden's central bank, the Riksbank to keep its policy rate on hold for the rest of 2026 and deliver only one 25 bp hike to 2.00% in early 2027.

They argue that Sweden's softer inflation, below-trend GDP growth, and lower neutral rate justify a path below the European Central Bank (ECB), despite a historically higher Swedish policy rate.

The strategists point out that Sweden's neutral rate estimate has fallen in recent years, but not as much as the ECB's estimate. They also note that Sweden faced weaker economic growth than the euro area in 2023 after rapidly raising rates, suggesting that monetary policy had a more immediate impact on aggregate demand.

This rapid impact may make the Riksbank more hesitant to raise rates in response to current inflationary pressures if it has concerns about a weak economic backdrop. The neutral rate estimates for the Riksbank and Norges Bank are generally higher relative to the ECB's, which helps explain why these Scandinavian central banks typically have seen higher rates.