Lower Inflation in May Signals Possible June Interest Rate Cut

Inflation was lower than expected in May. This speaks for an interest rate cut already in June rather than in the autumn, according to economists.

» Published: June 05 2025

Lower Inflation in May Signals Possible June Interest Rate Cut
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The Swedish Central Bank will announce its next interest rate decision on June 18, and it will be revealed whether the interest rate will remain at its current level (2.25 percent) or be lowered.

The current inflation data is the last factor that the Swedish Central Bank's board of directors and Erik Thedéen need to take a stance on. The inflation data from Statistics Sweden (SCB) was also favorable for the Swedish Central Bank, notes Handelsbanken's chief economist Christina Nyman. Just Handelsbanken is one of the major banks that now believe in a rate cut as early as June.

Yes, I think so. It's in line with the Swedish Central Bank's forecast, she says about the likelihood of a June rate cut.

It's not decisive for the actual outcome, but it's an important input together with the fact that we've seen weaker data for the Swedish economy. The overall picture therefore speaks of a rate cut in June.

The same level

Inflation was 2.3 percent in May, according to the KPIF measure, which means the same level as in April but lower than the market had forecast (2.5 percent on average, according to Bloomberg).

How much importance does it have if there is a rate cut in July compared to August?

It doesn't have a huge impact. But it's clear, for households it plays a big role if they get a rate cut or if they don't get one – so from that perspective it plays a big role.

Opens up for change

The major bank Nordea has in its latest forecasts for the central interest rate not believed in any further cuts this year. But now it may be changing, according to chief analyst Torbjörn Isaksson. The reason is both that today's inflation figures came in lower than expected and that the GDP growth in the beginning of the year was unexpectedly low.

Even if it's not big deviations, it's in that direction and it increases the likelihood that there will be a rate cut in June. We still have the prognosis that it won't happen. But we are humble and see that it can happen, says Torbjörn Isaksson.

Weak situation

Even Alexandra Stråberg, chief economist at Länförsäkringar, believes in a rate cut in June.

”It is therefore possible that the Swedish Central Bank will lower the interest rate as early as next week. The situation in the Swedish economy is very weak and the recovery has lost momentum. A lower inflation than expected speaks for a lower interest rate”, she writes in a comment.

Inflation was 2.3 percent in May, according to the KPIF measure, according to SCB. In April, price changes were at the same level on an annual basis.

Economists had on average forecast that inflation would rise to 2.5 percent in May, according to Bloomberg's compilation. Rental inflation, adjusted for energy prices, fell to 2.5 percent, compared to 3.1 in April. Even that was lower than expected. The pure inflation measure, KPI, was at a low 0.2 percent in May.

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

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