Riksbank Holds Rates, Cites Middle East War Risks

The Sveriges Riksbank left its policy rate unchanged at 1.75% for a fourth straight meeting in March 2026, signaling that borrowing costs will likely remain at this level for the foreseeable future. However, the central bank emphasized that the ongoing war in the Middle East introduces significant uncertainty to its economic projections. In its highly uncertain baseline scenario, the Riksbank assumes the conflict will have only moderate effects on inflation and economic recovery, though policymakers cautioned it is too early to fully assess its impact. The bank expects CPIF inflation to return to target by 2029, as temporary pressures from energy prices and VAT adjustments fade. Yet, the Riksbank stressed it remains ready to act in either direction: raising rates if inflation proves more persistent, even at the cost of weaker economic activity, or cutting rates if demand weakens significantly while inflationary pressures ease.