The Swedish Central Bank is lowering the interest rate by 0.25 percentage points to 2.0 percent. It is the seventh reduction since last May and the second so far this year.
The decision to lower is based, among other things, on the fact that inflation has followed the Swedish Central Bank's forecast and is expected to be in line with the target of 2 percent ahead.
The recovery in the Swedish economy is also slower than the Swedish Central Bank has counted on. The growth in the Swedish economy is weak, households are depressed and unemployment is still high.
Becomes more sluggish
Riksbank Governor Erik Thedéen describes it as trade conflicts and a turbulent world having created a "wet blanket" over the Swedish economy.
We see significant risks in the world around us. We have the economic crisis with trade tariffs and the tensions that come with it. Then we have the war in our immediate area, which affects the security policy in Europe, not least in Sweden, with sharply rising defense expenditures. And then we have the war between Iran and Israel, which can have significant global effects.
The entire situation means that there is every reason to be vigilant.
The Swedish economy has not taken off due to the uncertainty in the world around us, as the Swedish Central Bank has counted on. Therefore, the forecast for growth this year is being lowered from 1.9 percent to 1.2 percent.
But not everything is pitch black. According to Thedéen, there are "pretty good conditions for a stronger economy".
Inflation is near the target and we have wages that rise more than inflation, so we get a real wage increase.
The trade conflict with the US has not become "as extremely bad as one thought after April 2", says Thedéen.
It does not seem like we will get these draconian tariffs from the US, he says.
Can lower again
According to Thedéen, there is "a certain probability" that the Swedish Central Bank will lower the key interest rate again this year. The reason for this is an improved economy for households and a good profit development for companies.
But two things speak against it.
Partly, we could get supply shocks that lead to higher inflation. The oil price is one such example, tariffs are another. The other thing is, of course, that the Swedish economy really starts to take off a bit. Then the need to stimulate decreases.
I do not think one should expect a kickstart of the Swedish economy, that it explodes during the second half of the year and becomes very good growth. But there are reasons to believe that there will be a gradual improvement in growth during the second half of the year and next year. It is in our forecasts.
