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UBS Sees Next Monetary Move by Sweden's Central Bank to Be A Hike in Late 2026 After This Week's Surprise Rate Cut

BY MT Newswires | ECONOMIC | 09/24/25 09:43 AM EDT

09:43 AM EDT, 09/24/2025 (MT Newswires) -- Against consensus and market expectations, the Riksbank delivered a 25bps rate cut to 1.75% on Tuesday, said UBS.

With Tuesday's reduction at Sweden's central bank, the policy rate at 1.75% has likely become accommodative.

The bank estimates neutral to be around 2.25%, which is also the midpoint of the Riksbank's estimated neutral range of 1.5% to 3.0%.

Slightly expansionary monetary policy, combined with an expansionary fiscal stance, should support the growth recovery from here. As a consequence, UBS thinks the next policy rate change will eventually be a hike.

The Riksbank's policy rate forecast indicates this directionally, with a gradual increase starting in Q4 2026 to a forecast end point of 2.04% in Q3 2028.

The bank estimates two 25bps hikes to 2.25% in late 2026, when it also predicts the European Central Bank to hike once. The market priced out any probability of a further cut after Tuesday's decision and now sees a small likelihood (3.4bps) of a hike as soon as the end of the year, which might be motivated by the possibility of renewed upside inflation surprises.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.

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