Right now, a little push is needed to get the demand going, thinks Erik Thedéen.
Lower interest rate provides further support to the Swedish economy, he says at a press conference.
The decision to lower – made at a meeting in Malmö – comes after the Swedish Central Bank's majority noted that price plans in retail and in the service sector have been dampened.
Another reason is that demand is weak, says Thedéen.
Stronger krona plays a role
The krona's strengthening against the dollar and stable inflation expectations are other factors that have played a role in the decision, according to the central bank governor.
Torbjörn Isaksson, chief analyst at Nordea, notes that there is a small probability of an interest rate hike in the Swedish Central Bank's forecast as early as the third quarter of 2026.
But a lot will happen before that, so you shouldn't see it as a strong signal.
The reduction means that the Swedish Central Bank is taking another step down from the interest rate peak of 4.00 percent, which was reached during the inflation shock in 2022-2023. But the bottom for the policy rate may have been reached.
Divided analyst corps
Uncertainty exists, according to Thedéen. He mentions tariffs and geopolitics and how fiscal policy, not least the government's proposal for halved VAT, messes up the inflation forecasts.
The joker in the forecast is how much households will continue to save. But we believe we will get a fairly decent increase in consumption and GDP next year – just under three percent. That's our best assessment, says Thedéen.
The analyst corps was divided before the announcement. And even the Swedish Central Bank's board was in disagreement. Vice central bank governor Anna Seim reserved herself and wanted an unchanged interest rate now, but kept the door open for a reduction later this year.
Market reactions to the interest rate announcement were small. The krona strengthened a few öre against the dollar and the euro, while long market interest rates rose. The Stockholm stock exchange reacted positively and was up 0.9 percent about an hour after the interest rate announcement.
The Swedish Central Bank raises its inflation forecast for this year to a CPIF inflation of 2.6 percent, compared to previously 2.4 percent. But in 2026 and 2027, inflation will be significantly below the inflation target of 2.0 percent, according to the Swedish Central Bank: 1.0 and 1.7 percent, respectively. Previously, the forecast was 1.7 and 2.0 percent, respectively.
The Swedish Central Bank's forecast for Swedish GDP growth is revised down to 0.9 percent this year, but is raised to 2.7 percent in 2026 and 2.5 percent for 2027. The previous forecast had a growth of 1.2 percent this year, 2.4 percent in 2026 and 2.3 percent in 2027.
Unemployment is expected to peak at 8.7 percent to decline to 8.4 percent in 2026 and 7.9 percent in 2027. The peak this year is slightly higher than in the previous forecast.
In its forecast for the policy rate – the interest rate path – the Swedish Central Bank expects a policy rate of 1.75 percent until the third quarter of 2026, after which the forecast points to 1.88 percent in the third quarter of 2027 and 2.04 percent in the third quarter of 2028.
