Double Interest Rate Cut Not Ruled Out

This week, the inflation figure will be released, which will determine whether there will be an interest rate cut from the Swedish Central Bank shortly after and how large it will be in that case. A double rate cut is more likely right now than no cut at all, says Jens Magnusson from SEB.

» Updated: September 19 2024

» Published: August 11 2024

Double Interest Rate Cut Not Ruled Out
Photo: Judit Nilsson / SvD / TT

Share this article

In June, inflation fell to 1.3 percent according to the KPIF measure. It was an unexpectedly large decline and the lowest level since 2020. It was also significantly below the Swedish Central Bank's target of 2 percent.

On Wednesday, SCB will release figures for July, and according to the Swedish Central Bank's forecast, inflation is expected to rise to 1.8 percent according to the KPIF measure, where the costs of household borrowing rates are excluded.

But according to both Nordea's and SEB's forecasts, inflation will not rise as much, but to 1.6 percent and 1.5 percent, respectively.

It's a small increase from last month, but it's still below the Swedish Central Bank's target, says Jens Magnusson, chief economist at SEB.

The increase is due to so-called base effects in energy prices, which fell sharply in July last year but not as much this year.

There are clouds of concern

According to Nordea's chief analyst Torbjörn Isaksson, one should not interpret the increase as alarming, but he also adds that monthly figures are volatile and that there is always uncertainty in forecasts.

Inflation can be both higher and lower, he says.

But it would take a lot for the Swedish Central Bank not to lower the interest rate in August, according to both. On the other hand, there are clouds of concern – for example, that the Swedish krona weakens due to market uncertainty.

The krona is one of the few factors that could cause trouble. But it would require quite significant weakening, continues Torbjörn Isaksson.

And in such cases, it would likely lead to them hesitating about lowering in September and November.

Double rate cut in August?

Jens Magnusson, however, believes that the shaky market may instead lead to more interest rate cuts.

The Swedish Central Bank is not controlled by the stock market, but if a general economic uncertainty spreads, it speaks in favor of the Swedish Central Bank lowering the interest rate more rather than less.

The Swedish Central Bank has signaled that there may be up to three more interest rate cuts this year, which SEB also believes will happen. But Nordea's forecast is that there will be four.

Neither Torbjörn Isaksson nor Jens Magnusson believes in a double rate cut in August. But at the same time, they do not rule it out.

A double rate cut is more likely right now than no cut at all. But the main scenario is a cut of 25 points, says Magnusson.

It is more likely with four single cuts during the autumn than using double cuts.

Tags

Author

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

More news

Swedes Face Higher Costs Due to Norway's Fixed Electricity Prices
2 MIN READ

Swedes Face Higher Costs Due to Norway's Fixed Electricity Prices

Nvidia Stock Drops 2.7% Amid New York Market Decline
1 MIN READ

Nvidia Stock Drops 2.7% Amid New York Market Decline

Trump Criticizes EU's $33.9 Billion Fine on Google, Threatens Trade Probe
2 MIN READ

Trump Criticizes EU's $33.9 Billion Fine on Google, Threatens Trade Probe

US Job Market Slows with Only 22,000 New Jobs in August
2 MIN READ

US Job Market Slows with Only 22,000 New Jobs in August

Tesla Board Proposes New Bonus Plan for Elon Musk
1 MIN READ

Tesla Board Proposes New Bonus Plan for Elon Musk

13 Suspected of Insider Trading After Dawn Raid
1 MIN READ

13 Suspected of Insider Trading After Dawn Raid

18 Charged in Major Insider Trading Case in Sweden and Norway
1 MIN READ

18 Charged in Major Insider Trading Case in Sweden and Norway

Skandiabanken Offers Lowest Mortgage Rates in August
1 MIN READ

Skandiabanken Offers Lowest Mortgage Rates in August

Stockholm Stock Market Rises for Third Consecutive Day
1 MIN READ

Stockholm Stock Market Rises for Third Consecutive Day

Danish Energy Giant Ørsted Lowers Profit Expectations for This Year
1 MIN READ

Danish Energy Giant Ørsted Lowers Profit Expectations for This Year

Foreign Ownership Boosts Swedish Economy with Productivity Growth
1 MIN READ

Foreign Ownership Boosts Swedish Economy with Productivity Growth

Calm Housing Market Spurs Speculator Interest
2 MIN READ

Calm Housing Market Spurs Speculator Interest

Asian Stock Markets Rise Amid US-Japan Tariff Agreement
1 MIN READ

Asian Stock Markets Rise Amid US-Japan Tariff Agreement

USA and Japan Reach New Trade Agreement on 15% Tariffs
1 MIN READ

USA and Japan Reach New Trade Agreement on 15% Tariffs

Activity Toys Pose Serious Injury Risks for Children in EU Survey
1 MIN READ

Activity Toys Pose Serious Injury Risks for Children in EU Survey

Hexagon Sells Software Business for 30 Billion Kronor
1 MIN READ

Hexagon Sells Software Business for 30 Billion Kronor

US Stock Market Sees Broad Gains Amid Labor Market Weakness
1 MIN READ

US Stock Market Sees Broad Gains Amid Labor Market Weakness

Ørsted Sues Trump Administration Over Halted US Wind Project
1 MIN READ

Ørsted Sues Trump Administration Over Halted US Wind Project

US Private Sector Adds 54,000 Jobs in August, Below Expectations
1 MIN READ

US Private Sector Adds 54,000 Jobs in August, Below Expectations

Goldman Sachs: Fed Uncertainty Could Propel Gold Prices
1 MIN READ

Goldman Sachs: Fed Uncertainty Could Propel Gold Prices