In December 2024, Sveriges Riksbank assessed Sweden’s economy and monetary policy. This report highlights their decisions, rationale, and the broader economic context. Discover the key outcomes of the Riksbank’s December 2024 Monetary Policy Meeting. It includes a rate cut to 2.5%, inflation trends, and economic growth forecasts for Sweden.
Riksbank Monetary Policy Rate Adjustment
On December 19, 2024, the Riksbank announced a reduction in the policy rate by 0.25 percentage points, bringing it to 2.50%. This decision marked the fifth policy easing within the year, reflecting the central bank’s efforts to support economic activity amid subdued inflation.
Economic Indicators
- Inflation Trends: Sweden’s inflation rate has been on a declining trajectory, with the latest figures indicating a rate below the Riksbank’s 2% target. This downward trend in inflation has been a significant factor influencing the central bank’s monetary policy decisions.
- GDP Growth: The Swedish government revised its economic growth forecasts, projecting GDP growth of 0.6% for 2024, down from the previously anticipated 0.8%. For 2025, the growth forecast has been adjusted to 2.0% from 2.5%. These revisions underscore the challenges facing the Swedish economy.
- Unemployment Rates: The labor market has exhibited signs of weakness, with the unemployment rate expected to rise to 8.4% in 2025. This anticipated increase reflects the lagging response of the labor market to broader economic conditions.
Monetary Policy Outlook
Despite the recent rate cut, the Riksbank has signaled a cautious approach moving forward. Also, the central bank indicated the possibility of one more rate cut in the first half of 2025, contingent upon the stability of inflation and economic activity. This measured stance reflects the bank’s recognition of the lagging effects of monetary policy adjustments on the economy.
Financial Stability Measures
Riksbank Governor Erik Thedéen highlighted the role of amortization requirements and mortgage caps in enhancing household resilience. Moreover, these measures help households handle rising inflation and interest rates. They play a key role in maintaining financial stability.
Global Economic Context
The IMF’s January 2025 World Economic Outlook projects global growth at 3.3% for 2025 and 2026, unchanged from prior estimates. Upward revisions for the U.S. offset declines in other major economies. Also, upward revisions for the U.S. offset declines in other major economies. The global economic environment remains characterized by divergent paths and medium-term risks tilted to the downside.
Conclusion
The Riksbank’s December 2024 monetary policy meeting reflects a strategic response to Sweden’s evolving economic conditions. By adjusting the policy rate and maintaining a cautious outlook, the central bank aims to navigate the complexities of low inflation, modest GDP growth, and labor market challenges. Moreover, ongoing assessments and adaptive policy measures will be crucial in steering the Swedish economy toward sustained stability and growth.
