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Investing.com - Sweden’s central bank has suggested that it could ratchet down interest rates further as it grapples with tepid economic activity and easing inflation, according to minutes from a meeting last week where officials slashed its key policy rate to 2%.
"Today, we are signalling some probability that it may be warranted to cut the rate further," Sveriges Riksbank Chair Erik Thedéen wrote in the minutes on Wednesday.
However, Thedéen flagged that "this signal should not be over-interpreted, given the uncertain situation." Thedéen pointed in particular to "ongoing trade and geopolitical conflicts that are creating risks" which, if they should materialize, could pose "difficult choices" for the central bank.
"These risks are not something we can act on today; what can be done is to monitor and analyse events closely, so that we can interpret them as accurately as possible," Thedéen said.
Central bankers around the world have noted murkiness in the broader economic outlook due to a lack of clarity surrounding U.S. President Donald Trump’s aggressive tariff agenda. Although Trump has delayed his punishing "reciprocal" levies on a host of countries until July, baseline 10% duties and other trade taxes on items like steel and aluminum remain in place.
Elsewhere, a 12-day air war between Israel and Iran has raised concerns over oil and gas supplies out of the Middle East. A Trump-brokered ceasefire was holding on Wednesday, helping crude prices remain at multi-week lows following a surge in recent days that reignited fears over upward inflationary pressures.
In Sweden, inflation has been lower than anticipated, while consumer confidence has been muted while gross domestic product unexpectedly contracted in the first quarter.
The Riksbank has also noted that unemployment is "high," adding that the overall uncertainty may "hamper the recovery" in the wider economy in the near term.
Against this backdrop, the central bank cut its policy rate by 25 basis points on June 18, in line with economists’ estimates. Officials had previously anticipated that the rate would stay at 2.25% until the end of 2027.