Swedish central bank keeps rates on hold at 1.75%, says uncertainty has increased

Sweden's central bank kept its key interest rate at 1.75% on Thursday as widely expected and forecast no change was likely for the rest of the year.

"However, the uncertainty regarding the outlook for inflation and economic activity has increased," the Riksbank said in a statement.

"The Riksbank is vigilant with regard to developments and is prepared to adjust monetary policy if the outlook changes."

The central bank has been enjoying a rare "Goldilocks" moment where the economy is growing and inflation is close to the 2% target.

But analysts point out that the balance is a fragile one.

Geopolitical tensions are running high, growth could disappoint and inflation undershoot. Analysts haven't ruled out a rate cut by summer.

But if geopolitical uncertainties recede, GDP growth may accelerate bringing forward a rate cut to the final quarter of the year.

Analysts' main scenario, however, is for no change until early 2027.

The central bank will announce its next policy decision on March 19.

-Simon Johnson and Niklas Pollard/Reuters