PUBLISHED June 28, 2026
According to the Sveriges Riksbank’s June 2026 monetary policy decision, the Executive Board voted to leave the policy rate unchanged at 1.75 percent for the sixth consecutive meeting — a decision that came with a notable shift in tone: growing inflation risks from the Middle East conflict are now raising the likelihood of a rate hike before the end of the year.
Sixth Hold in a Row — But the Mood Is Shifting
On 17 June, the Riksbank left its policy rate unchanged at 1.75 percent for its sixth consecutive meeting, in line with market expectations. In making its decision, the Riksbank highlighted growing risks to inflation stemming from the conflict in the Middle East. Nevertheless, a hike was not warranted as the Bank noted that inflation remained below its 2.0 percent target through May. The Riksbank also pointed to recently weaker-than-expected economic activity as an additional reason for holding fire until a clearer picture of the war’s effects emerges.
Inflation Below Target — But Not for Long
Sweden’s inflation picture in June 2026 is unusual: the CPIF rate is running well below the Riksbank’s 2 percent target, largely because of a series of fiscal policy measures that have suppressed consumer prices. A temporary cut in food VAT, reduced fuel taxes, lower electricity taxes, and subsidized public transport tickets are together holding measured inflation below 1.5 percent. However, the Riksbank is clear that these effects are temporary — and that energy price pressures from the Strait of Hormuz blockade are already starting to filter through into production costs and will increasingly affect consumer prices in the second half of 2026.
The Middle East Risk: Prolonged Disruption Could Force Action
Sweden’s central bank held its policy rate at 1.75 percent in June 2026 but raised the likelihood of a hike later this year, citing growing inflation risks. While inflation remains subdued, largely due to the dampening effects of fiscal policy measures, and economic activity is weak, policymakers highlighted that prolonged supply disruptions from the Middle East conflict have heightened inflationary pressures and could amplify price effects if they persist. The Riksbank’s baseline assumes that oil supply will normalize and prices will fall — but it has made clear it stands ready to raise rates if that assumption proves wrong and inflation begins to rise more persistently.
The Bank signaled that hikes could become necessary should a protracted Middle East conflict drive a persistent upturn in inflation. Panel forecasters are split over the year-end outlook, with roughly half expecting the Riksbank to stand pat and the other half penciling in a 25–50 basis point hike. Goldman Sachs analysts expect the Riksbank to stay on hold in June and start raising rates later in 2026, reaching 2.25 percent by 2027 — but only after clear evidence that energy price effects are generating broader and more persistent inflationary pressure.
The Bank signaled that hikes could become necessary should a protracted Middle East conflict drive a persistent upturn in inflation. Panel forecasters are split over the year-end outlook, with roughly half expecting the Riksbank to stand pat and the other half penciling in a 25–50 basis point hike. Goldman Sachs analysts expect the Riksbank to stay on hold in June and start raising rates later in 2026, reaching 2.25 percent by 2027 — but only after clear evidence that energy price effects are generating broader and more persistent inflationary pressure.
The Riksbank explicitly cited weaker-than-expected economic data as a key factor in the June hold decision. Swedish GDP contracted slightly in Q1 2026, pulled down by falls in both public investment and public consumption after an unusually strong Q4 2025. The Executive Board decided to leave the policy rate unchanged at 1.75 percent at its monetary policy meeting on 16 June 2026. The Riksbank’s forecasts are based on data available up to 11 June — meaning that developments in the Middle East after that date, including a significant Memorandum of Understanding signed between parties to the conflict, were not incorporated into the report’s reasoning.
Sweden’s monetary policy challenge in mid-2026 is unusual: inflation is being held artificially low by fiscal policy even as underlying cost pressures build, while domestic demand is recovering but labor market momentum is weak. The Riksbank must decide whether to look through the temporary fiscal suppression of inflation and act preemptively against the building energy shock — or to wait for clearer evidence before tightening. The Riksbank’s outlook assumes oil supply will normalize soon, with prices expected to fall, limiting the pass-through to import and consumer prices. That assumption is being watched closely by markets, businesses, and households alike.
The next monetary policy meeting will take place on 19 August 2026 and information on the monetary policy decision, including the policy rate, will be communicated the day after, 20 August 2026. By then, the Riksbank will have a clearer picture of whether the Middle East energy shock is proving temporary or persistent — a judgment that will likely determine whether Sweden’s interest rate cycle turns upward before the year is out
The Riksbank explicitly cited weaker-than-expected economic data as a key factor in the June hold decision. Swedish GDP contracted slightly in Q1 2026, pulled down by falls in both public investment and public consumption after an unusually strong Q4 2025. The Executive Board decided to leave the policy rate unchanged at 1.75 percent at its monetary policy meeting on 16 June 2026. The Riksbank’s forecasts are based on data available up to 11 June — meaning that developments in the Middle East after that date, including a significant Memorandum of Understanding signed between parties to the conflict, were not incorporated into the report’s reasoning.
Sweden’s monetary policy challenge in mid-2026 is unusual: inflation is being held artificially low by fiscal policy even as underlying cost pressures build, while domestic demand is recovering but labor market momentum is weak. The Riksbank must decide whether to look through the temporary fiscal suppression of inflation and act preemptively against the building energy shock — or to wait for clearer evidence before tightening. The Riksbank’s outlook assumes oil supply will normalize soon, with prices expected to fall, limiting the pass-through to import and consumer prices. That assumption is being watched closely by markets, businesses, and households alike.
The next monetary policy meeting will take place on 19 August 2026 and information on the monetary policy decision, including the policy rate, will be communicated the day after, 20 August 2026. By then, the Riksbank will have a clearer picture of whether the Middle East energy shock is proving temporary or persistent — a judgment that will likely determine whether Sweden’s interest rate cycle turns upward before the year is out
