Diminished Expectations of Interest Rate Cut

The market's expectations of a further cut in the interest rate this year have been dampened somewhat after Wednesday's announcement from the Central Bank.

» Published: January 29 2025

Diminished Expectations of Interest Rate Cut
Photo: Claudio Bresciani/TT

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The probability has now decreased to 44 percent that there will be a reduction at the monetary policy meeting in May, according to a report from the major bank SEB. This can be compared to a probability of 48 percent a week ago.

It's not certain that there will be a reduction. Now there is genuine uncertainty, says SEB's interest rate strategist Amanda Sundström about how the talk is going among interest rate traders.

There is increased uncertainty about how it will turn out, whether there will be a reduction or not. That's how I think it will continue to look, unless new data comes out pointing in some direction, she adds.

A factor that can influence expectations of the Swedish key interest rate is how the tone goes when the US central bank Federal Reserve (Fed) presents its interest rate decision on Wednesday evening Swedish time, according to Sundström.

The Swedish Central Bank has in its interest rate forecast from December, which still largely applies according to Wednesday's statements from CEO Erik Thedéen, not indicated any further reductions of the key interest rate.

Among many assessors, including SEB's economists, one expects a reduction – likely in May.

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By TTEnglish edition by Sweden Herald, adapted for local and international readers

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