Riksbank Holds Interest Rate Steady at 1.75% Amid Mixed Economic Signals

On December 18, 2025, the Riksbank announced it would keep the key interest rate unchanged at 1.75%, marking the final monetary policy decision of the year. This leveling reflects the bank’s assessment that inflation is stabilizing near its 2% target and that the Swedish economy is showing unexpectedly strong growth, prompting expectations that the rate will remain at this level through at least the first three quarters of 2026.

Since spring 2022, the Riksbank has adjusted the interest rate 16 times, a significant departure from only two increases over the previous six years. The current cautious stance is supported by the positive performance of the economy and a stronger krona against major currencies. However, despite the stable policy rate, borrowing costs for the government, businesses, and households are rising. Interest rates on two-year government loans have climbed from 1.7% to 2.2% since summer 2025, influenced by economic fundamentals and notably the government’s increased borrowing to finance defense expenditures and support for Ukraine. The Swedish National Debt Office projects that state borrowing will rise by 173 billion SEK in 2026 and further to 194 billion SEK by 2027.

The year 2025 has posed economic challenges for Swedish households and businesses, with a slower-than-expected recovery. Yet economic experts, including SBAB’s Chief Economist Robert Boije, express optimism for a better economic outlook in 2026, despite ongoing uncertainties. SBAB plans to release updated forecasts and analyses on the economy and housing market in the new year.

This balanced scenario underscores risks alongside resilience: while monetary policy remains steady and inflation is under control, increased public borrowing could raise overall borrowing costs and influence the economy. The Riksbank and government policies will thus continue shaping Sweden's economic path in the months ahead.