Sweden’s central bank, the Riksbank, has been navigating a challenging economic landscape in 2025, as outlined in recent updates.
From a gloomy business survey to new monetary policy measures and reflections on communication strategies, the Riksbank’s actions reflect a cautious approach to stabilizing Sweden’s economy amid global uncertainties.
The Riksbank’s Business Survey paints a stark picture of deteriorating economic sentiment.
Titled “Things that were moving in the right direction have fizzled out,” the survey reveals a significant downturn in companies’ outlook for the coming months.
Conducted between May 8-19, 2025, with 48 major firms employing around 250,000 workers, the survey highlights weakened economic conditions, particularly in manufacturing.
Industrial activity has slumped, driven by global trade policy tensions and uncertainty, which have led customers to delay purchases and investments.
Retail trade, while relatively stable with rising sales volumes, faces concerns about cautious consumer behavior due to this uncertainty.
Some sectors, like restaurants, are already seeing sales declines.
Companies selling to households plan price hikes to offset rising costs, though a stronger Swedish krona may mitigate this.
However, business-to-business or B2B firms are less likely to raise prices due to weaker demand, signaling a broader economic slowdown.
This survey underscores how global disruptions, including trade conflicts, are hitting Sweden’s open economy hard.
In response to these challenges, the Riksbank introduced a notable policy shift on April 16, 2025, announcing interest-free deposits for credit institutions.
This temporary measure, effective from April 28, 2025, to April 27, 2026, allows banks to deposit funds with the Riksbank without earning interest.
Previously, such deposits earned the policy rate minus 0.10 percentage points.
The move aims to adjust the banking system’s structural liquidity surplus, which has grown due to the Riksbank’s bond sales.
By removing interest on these deposits, the Riksbank seeks to encourage banks to manage liquidity more actively, potentially boosting credit flow to businesses and households.
This decision, while technical, reflects the Riksbank’s attempt to fine-tune monetary conditions in a weakening economy without altering the policy rate, which remains at 2.25%.
Monetary policy in 2024 was also under scrutiny during a March 27, 2025, hearing by the Riksdag Committee on Finance, where the Riksbank’s Executive Board discussed its performance.
The Riksbank’s 2022-2023 rate hikes successfully brought inflation close to the 2% target, averaging 1.9% in 2024.
With inflation stabilized, the bank cut rates from 4% to 2.5% over the year, fostering a modest GDP recovery of 1%.
However, the labor market remained weak, and global turbulence, including trade policy shifts and security concerns, posed risks.
The hearing emphasized the Riksbank’s commitment to monitoring inflation and economic activity closely, maintaining flexibility to adjust policy if needed.
This dialogue with lawmakers highlights the bank’s accountability in balancing growth and price stability.
Finally, Governor Erik Thedéen’s speech on monetary policy communication offered insights into the Riksbank’s strategy.
Speaking at the Stockholm School of Economics, Thedéen stressed the importance of clear, transparent communication to manage public expectations.
He reflected on the challenges of explaining complex decisions, like rate cuts or asset purchases, in an era of rapid information flow.
Effective communication, he argued, enhances policy credibility and supports economic stability.
This focus on dialogue is critical as the Riksbank navigates uncertain times, ensuring stakeholders understand its rationale amid global and domestic headwinds.
Together, these updates reveal a Riksbank grappling with a faltering economy, global uncertainties, and the need for precise policy and communication.
The business survey signals caution, while interest-free deposits and past rate cuts aim to stimulate activity.
As Sweden faces these challenges, the Riksbank’s adaptability and transparency will be key to fostering resilience.