The average forecast among analysts is that Statistics Sweden (SCB) will report a December inflation rate of 1.8 percent according to the KPIF measure, i.e. adjusted for mortgage rate effects. This is shown by a compilation of forecasts made by Bloomberg.
The underlying inflation rate, according to the KPIF measure excluding energy prices, is expected to have fallen to 2.2 percent – down from 2.4 percent in November.
To Stimulate Demand
This development would be in line with the Swedish Central Bank's latest inflation forecast. And it would open up the possibility of the Swedish Central Bank lowering the interest rate once again in the near future.
A lower interest rate aims to stimulate demand in the economy, which creates upward pressure on prices.
The Swedish Central Bank's so-called interest rate path, i.e. the bank's forecast for the interest rate going forward, points to a 0.25 percentage point reduction to 2.25 percent at the end of January or in March.
The Swedish Central Bank – which last year with five reductions lowered the interest rate from 4.00 in May to 2.50 percent in December – believes according to its interest rate path that it will be time for a pause after the next reduction.
But among assessors and among professionals on the interest rate market, there are many who believe that there will be more reductions – at least one more.
Cost of Mortgages May Fall
Nordea's chief analyst Torbjörn Isaksson believes in a reduction of the interest rate in January followed by another reduction in May – down to 2.00 percent. This is because he sees a weaker inflation ahead than the Swedish Central Bank's economists. Among other things, he believes that the inflation rate in December last year was only 1.6 percent.
Reductions in the interest rate pull down the entire interest rate level in the economy. The effect is usually clear, especially for variable mortgage rates.
If the mortgage rate were to follow down by 0.50 percentage points during the spring, the cost of a mortgage of three million kronor would decrease by 15,000 kronor per year or 1,250 kronor per month – if you disregard the effects of interest deductions.
The Swedish Central Bank's inflation target is 2.0 percent according to the KPIF measure. If the inflation rate in December last year was 1.8 percent – which most believe – it means that the inflation rate for the whole of 2024 would land at an average of 1.9 percent, down from around 6.0 percent in 2023.
