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Sweden's central bank holds rate at 1.75%, signals readiness to hike this year
Sweden's central bank voted to keep its policy rate at 1.75% at its meeting on Thursday, August 20, 2026, extending its rate pause for a twelfth consecutive month, while reiterating that a rate increase remains possible this year if the Iran war causes inflation pressures to return persistently. The decision matched the expectations of all 19 economists surveyed by Bloomberg. Sweden's 1.75% rate is the lowest in the European Union. The monetary policy committee led by Governor Erik Thedéen said the possibility of raising rates later this year remains, after the central bank assessed in June that there was a 50% chance of a 0.25 percentage point hike within 2026. The central bank said that if higher-than-expected summer inflation marks the start of a stronger and more prolonged pickup in inflation, it is prepared to tighten monetary policy. However, no new economic forecasts or rate path were published at this meeting. Sweden's economy, the largest in the Nordic region, has struggled to maintain momentum this year amid the impact of US tariff measures and the Iran war, which have weighed on household and business confidence. The Swedish government, facing pressure from polls ahead of the September 13 general election, has introduced fiscal measures to support the economy, including cuts to food and fuel taxes to help accelerate the recovery. On inflation, core inflation rose in July and was slightly above the central bank's June forecast, but remained clearly below the 2% inflation target. The central bank said the decision to hold rates reflects a balancing of the risk that the war could create more price pressure against the fact that inflation remains low, while the labour market is slightly weaker than expected. Sweden's stance comes amid diverging monetary policy directions among major economies, with Norway raising rates in May, while the European Central Bank and Denmark's central bank raised rates in June. The Bank of England and the US Federal Reserve have maintained a wait-and-see approach.