Risks to financial stability in Sweden have increased, Riksbank says

STOCKHOLM (Reuters) -Risks to financial stability in Sweden have increased as a result of U.S. President Donald Trump's tariffs and the administration's foreign policy agenda, the central bank said on Wednesday.

"The sharp shifts in U.S. trade and security policy have caused substantial market movements during the spring and entail greater uncertainty than usual," the Riksbank said in a statement accompanying its bi-annual financial stability report.

"The risk of financial instability has increased," it said.

The Riksbank said Sweden's starting point for dealing with increased uncertainty was good, with a robust policy framework, strong public finances and profitable banks that had strong capital and liquidity buffers.

But it also pointed to vulnerabilities related to the interlinked banking system and heavily indebted property companies and households.

Donald Trump's on-again, off-again tariffs have already hit Sweden's economy, which stalled in the first quarter, according to flash figures. Final GDP figures are due on Friday.

The government recently cut its full-year growth forecast to 1.8% from 2.3%, and Finance Minister Elisabeth Svantesson said risks were that the outcome could be worse.

The central bank has said it could cut the policy rate in the months ahead if growth slows and price pressures continue to ease.

(Reporting by Anna Ringstrom and Simon Johnson, editing by Louise Rasmussen)

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