The recovery is not getting started. If one were to wish for something, it would be that they actually lowered by 50 points (0.50 percentage points) this time as well. But that is not our prognosis. I do not think it will happen, says Mattias Persson, chief economist at Swedbank.
Critical of the Swedish Central Bank
He is critical of the Swedish Central Bank and thinks the interest rate cuts so far this year could have been both faster and larger.
The Swedish Central Bank has since May this year lowered the repo rate from 4.00 to 2.75 percent. And the board has flagged for a cut on Thursday and another cut, down to 2.25 percent, during the first half of 2025.
This would mean that the Swedish Central Bank has reached the midpoint of the range 1.50-3.00 percent, which Vice Governor Anna Seim in November defined as the Swedish Central Bank's new "neutral interest rate" - i.e. an interest rate that neither stimulates nor restricts the economy.
LO's chief economist Torbjörn Hållö would also have liked a double cut on Thursday. He thinks the repo rate should have been pushed down to the "neutral level" already last summer.
Lowering the interest rate gradually, step by step, I attribute less value than the cost we get in the form of higher unemployment and lower growth, he says.
But now he thinks the Swedish Central Bank will soon be finished with cuts this round. Then he wants to see the government follow up its budget initiatives on savings and tax cuts with stimuli to low- and middle-income earners - to get consumption going.
"The Swedish Central Bank raised too aggressively"
Sven-Olof Daunfeldt, chief economist at Svenskt Näringsliv, does not agree with the budget criticism at all. And he thinks the Swedish Central Bank is doing the right thing with gradual cuts. But the interest rate should have been significantly lower than it is now, he thinks:
The big problem was that the Swedish Central Bank raised too fast and aggressively in the inflation shock.
When the parties agreed on wages that were not driven by inflation, the Swedish Central Bank could have taken it much easier. Then we would have had a much better situation now and the recession would not have had to be so deep. It was a mistake.
Daunfeldt thinks it will be difficult to repair this, with all the uncertainty in the world and industrial headwinds.
The risk is that households think the situation is so serious that they choose to save instead of consuming, he says.
Joakim Goksör/TT
Facts: Fed expected to lower interest rate
TT
The US central bank, the Federal Reserve (Fed), is expected to lower the interest rate by 0.25 percentage points to 4.25-4.50 percent in the decision on Wednesday evening Swedish time. The so-called dot plot - i.e. a mapping of the Fed members' forecasts for the interest rate going forward - is expected to point to an interest rate around 3.50-3.75 percent at the end of 2025 and 2.75-3.00 percent at the end of 2026.
The European Central Bank (ECB) lowered its interest rates by 0.25 percentage points last week and has flagged for further cuts. The key interest rate on deposits at the ECB was lowered to 3.00 percent and is expected, according to market pricing, to be pushed down to 2.00 percent in 2025.
