The ECB's important so-called deposit rate is being lowered by a unanimous direction with 0.25 percentage points to 2.25 percent – the same level as the Swedish Central Bank's repo rate.
Alternative options were discussed, but no one argued for 0.50 percentage points, says ECB President Christine Lagarde at a press conference.
She adds that several direction members just a few weeks ago were clear that they did not want to lower the rate at all.
The decision to lower the rate was, however, expected, according to an analyst survey conducted by the news agency Bloomberg.
The Krona Strengthened
The market reacted marginally. The krona strengthened after a brief period of hesitation a few öre against the euro, while the Frankfurt stock exchange's decline was dampened somewhat. On the bond market, Swedish market interest rates were pressed down a few points.
The Trump administration's tariff shock – which has created new risks for an economic downturn – had contributed to dampening the discussion about the ECB leaving the repo rates unchanged before the interest rate decision.
About the tariffs, Lagarde says it is too early to say what effects they will have.
But we are not in a world free from shocks, that is certain, she says.
Lowest Rate in Two Years
The ECB's decision creates monetary policy space for the Swedish Central Bank to lower the repo rate, which in turn usually gets variable mortgage rates to fall for Swedish households.
SEB's chief economist Jens Magnusson is, however, cautious in his conclusions:
— We believe that the ECB will eventually come further down in its interest rate path than the Swedish Central Bank will do. You naturally look at each other, but I do not think the Swedish Central Bank is significantly affected by today's decision. It was the expected, he says to TT.
Several actors, such as Handelsbanken and SBAB, have flagged that they believe the Swedish Central Bank will need to lower the repo rate, Handelsbanken believes, for example, in three rate cuts. SEB, in turn, will come up with a new forecast in two weeks. Without anticipating it, Jens Magnusson notes that the bank leans more towards a rate cut than a rate hike.
— Yes, I definitely do, but our main forecast is that the Swedish Central Bank will settle and stay put, he says based on the latest months' inflation outcomes.
The ECB's deposit rate is, after the cut, at the lowest level since the spring of 2023.
The market pricing ahead of the interest rate decision pointed to a high probability that the ECB would lower its repo rates by 0.25 percentage points two more times before the end of the year.
