Sweden‘s Central Bank Cuts Key Policy Rate to 1.75 Percent Amidst economic Slowdown
Stockholm, Sweden - Sweden’s central bank has lowered its key policy rate to 1.75 percent, a move intended to stimulate economic growth following a period of sharp slowdown after pandemic-era stimulus measures. The decision reflects a divergence in economic performance between Sweden and its neighbor, Norway, despite both initially experiencing rapid price growth fueled by low interest rates.
Following the pandemic, both Norway and Sweden saw significant price increases due to low interest rates designed to boost their economies. While Norway’s economy has proven resilient to subsequent interest rate hikes aimed at curbing inflation, Sweden’s economy has slowed considerably. A key factor in this difference is Norway’s considerable financial versatility derived from its oil fund, allowing for greater maneuverability in fiscal policy and providing welcomed NOK through the state budget.
Norwegian private consumption growth currently ranks highest among OECD countries, while swedish consumption growth sits at the bottom. Sweden,lacking a similar sovereign wealth fund,has relied on other fiscal instruments,recently announcing a state budget for 2026 including SEK 80 billion in reforms and tax cuts. The long-term consequences of this more expansive fiscal policy remain uncertain, though increased budget deficits are anticipated.
The Swedish Central Bank Chief anticipates the 1.75 percent rate will remain in place for some time, hoping to spur economic growth and job creation. For Swedish homeowners, the rate cut offers relief in the form of lower mortgage interest payments.
