The Swedish Central Bank) assesses that it is "somewhat" more likely that inflation will be lower than that it will be higher than in the March prognosis. This allows for a lower interest rate further ahead.
It would speak in favor of a somewhat easier monetary policy ahead, says the Swedish Central Bank chief Erik Thedéen at a press conference.
Vaguely formulated
He emphasizes that the bank currently does not specify what an interest rate cut, in such cases, would imply in terms of scope or when in time it could become relevant. The uncertainty is too great for that.
It is deliberately quite vaguely formulated.
But he says at the same time that policy is "well-balanced".
Uncertainty is a recurring theme in the Swedish Central Bank leadership's view of the future. The trade war in the USA and its impact on the economy and thus inflation is difficult to assess.
It has settled like a wet blanket over the global economy, including the Swedish one, says Thedéen>
The economic outlook is somewhat weaker than what we saw in March, continues he.
Counting on a cut
The krona and Swedish market rates did not move significantly after the signal from the Swedish Central Bank about a possible interest rate cut at the coming meetings.
In the interest rate market, expectations of cuts from the Swedish Central Bank are increasing following the interest rate decision. The probability of a cut in the benchmark rate to 2 percent is now at 60 percent in pricing, while a cut in August is fully priced in.
The probability of a second cut – down to 1.75 percent – before the year-end is increasing simultaneously to 84 percent.
The interest rate decision comes after an inflation report from Statistics Sweden (SCB) last week, which showed that the so-called KPIF-inflation in April was at 2.3 percent. Adjusted for energy prices, it was measured at 3.1 percent during the month.
The Swedish Central Bank's inflation target is at 2.0 percent KPIF-inflation.
