Sweden's Riksbank and Norway's Norges Bank Take Diverging Paths — Update

Sweden's Riksbank and Norway's Norges Bank have adopted differing monetary policies in response to the Middle East conflict. The Riksbank maintained its key policy rate at 1.75%, emphasizing a cautious approach amid falling inflation and economic uncertainty. In contrast, Norges Bank raised its rate to 4.25% to combat persistent inflation, which has exceeded its target for over four years. Both banks are closely monitoring the economic impact of the ongoing conflict, with the Riksbank indicating a potential for future rate adjustments depending on inflation trends.

By Dominic Chopping

STOCKHOLM--Central banks in Sweden and Norway took diverging views on the unfolding developments in the Middle East, as they contend with very different outlooks for inflation.

Policymakers at Sweden's Riksbank stuck to a wait-and-see approach, holding the key policy rate at 1.75%, but said they remain vigilant and prepared to act rapidly if the Middle East conflict sends inflation higher or hits economic development.

Meanwhile, Norges Bank lifted its key policy rate to 4.25% from 4%, as it seeks to put a lid on elevated inflation amid an uncertain outlook sparked by the conflict.

The Riksbank decision to keep its rate unchanged was in line with a poll by The Wall Street Journal, while economists had been split before the Norges Bank decision, with a narrow majority in a WSJ poll expecting the central bank to raise rates Thursday.

Riksbank policymakers have held rates steady for five consecutive meetings as they monitor falling inflation and a stuttering domestic economy, while highlighting that the current global uncertainty calls for vigilance.

Since the outbreak of war, the Riksbank has said it expects signs that growth is weaker than anticipated, while the risk of higher inflation due to the conflict has increased.

At the same time, inflation is currently below target and, the longer the war goes on, the greater the risk that conditions will worsen, the central bank said.

"This together with the weak economic activity at the outset means that there is scope to wait until there is a clearer picture of the effects of the war and the supply shocks it entails."

There were no new estimates presented Thursday, but the central bank's most recent forecasts signaled that the rate will remain unchanged this year before beginning to gradually rise.

"The current level of the policy rate gives the Riksbank a good initial position to adjust monetary policy if required to safeguard the inflation target," the central bank said.

In Norway, policymakers delivered two rate cuts last year, but had indicated that inflation would likely prompt a tightening of monetary policy in the near future.

Annual core inflation in the country remains elevated at 3.0% and has remained above the 2% target for over four years, just as central banks are having to gauge the impact of the war that has sent energy prices rising and clouded the outlook for inflation and economic growth.

"Inflation is too high and has run above target for several years," Gov. Ida Wolden Bache said.

"The war in the Middle East is still causing substantial uncertainty about the economic outlook," she added.

No new projections were presented Thursday, but the central bank said the outlook doesn't appear to have changed materially since it presented its previous forecast, which signaled a policy rate of between 4.25% and 4.5% by the end of this year.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

May 07, 2026 05:28 ET (09:28 GMT)