The Central Bank is warning of 4-5 rate cuts

The Swedish Central Bank lowers the interest rate by 0.25 percentage points and opens up for the possibility of a double-sized reduction in November or December. And then even more is expected. The economy is weaker, which means there is reason to move faster, says Riksbank Governor Erik Thedéen.

» Updated: September 28 2024

» Published: September 25 2024

The Central Bank is warning of 4-5 rate cuts
Photo: Jonas Ekströmer/TT

Why don't you lower with bigger steps right now?

We believe it's reasonable to move at a faster pace, but we're not doing everything at once, that would be too risky, says Thedéen in an interview with TT.

Critics think you're moving too slowly.

I don't agree with that. According to our main forecast, we will have lowered by 1.25 percentage points by the end of the year. That's a very rapid reduction in 7-8 months, compared to what most other Western central banks have done and compared to the great uncertainty that exists.

4-5 reductions to come

And according to Thedéen, it wasn't close to a 50-point reduction right now. No, all five members of the Swedish Central Bank's board were unanimous.

Overall, the Swedish Central Bank currently assesses that the repo rate should be lowered by between 0.50 and 0.75 percentage points by the end of the year, "if the outlook holds", and possibly including a double reduction. But the main scenario is still two reductions of 0.25 percentage points each, according to Thedéen.

And we're adding that there may be one or two reductions in the first half of next year, he says.

The reason the Swedish Central Bank is increasing the pace of its planned reductions is a safer belief that inflation is being fought, for this time. And that the economy has slowed down further.

We had thought that household consumption would have picked up more than it has, which gives some concern and is an important reason why we're stimulating more now, says Thedéen.

"Affects household behavior"

In a year's time, the repo rate could be at 2.25 percent, if you believe the Swedish Central Bank's forecasts.

And that can affect household behavior quite a lot, says Thedéen, who expects households to start consuming more and thus boosting economic growth.

But as always, the Swedish Central Bank is including a number of uncertainty factors, the rate may be both lower or higher than currently forecast.

"There are risks associated with, among other things, the recovery in the Swedish economy, geopolitical uncertainty, and the exchange rate of the krona, which can lead to a different development of inflation and the formation of monetary policy", writes the Swedish Central Bank.

The Swedish Central Bank's economists are lowering their forecast for CPIF inflation to 1.7 percent this year, from previously 2.0 percent. For 2025, the forecast is lowered to 1.6 percent in CPIF rate, from previously 1.8 percent, according to a new monetary policy report prepared in connection with the interest rate meeting.

The Swedish Central Bank's inflation target is 2.0 percent, measured as CPIF where interest rate effects are excluded.

The central bank is also lowering its GDP forecast for 2024 to a growth rate of 0.8 percent, from previously 1.1 percent. For 2025, the growth forecast is raised to 1.9 percent, from previously 1.7 percent.

The unemployment forecast for this year is adjusted down to 8.4 percent, from 8.5 percent. But for 2025, it will be an upward adjustment to 8.4 percent, from previously 8.3 percent.

Source: The Swedish Central Bank

Tags

TTT
By TTThis article has been altered and translated by Sweden Herald

More news

Sweden's Industry Agreement Secures 6.4
2 MIN READ

Sweden's Industry Agreement Secures 6.4 Percent Wage Rise Over Two Years

Snus Delivery Strike Averted as
1 MIN READ

Snus Delivery Strike Averted as Union Reaches Agreement

Swedish Manufacturing Growth Continues Despite
1 MIN READ

Swedish Manufacturing Growth Continues Despite Global Challenges

Positive Outlook for Harvest Season
1 MIN READ

Positive Outlook for Harvest Season Despite Challenges Ahead

Sweden's New Industrial Agreement Brings
2 MIN READ

Sweden's New Industrial Agreement Brings Stability in Uncertain Times

Stockholm Stock Exchange Shows Signs
1 MIN READ

Stockholm Stock Exchange Shows Signs of Recovery as Futures Rise

Gold Prices Hit Record High
1 MIN READ

Gold Prices Hit Record High as Tariff Decision Looms

Australian Central Bank Holds Rates
1 MIN READ

Australian Central Bank Holds Rates Steady, Signals Caution on Inflation

Bankruptcies Rise Again with Hotels
1 MIN READ

Bankruptcies Rise Again with Hotels and Restaurants Hit Hardest

Asian Markets Rebound as Investors
1 MIN READ

Asian Markets Rebound as Investors Await Tariff News

Trump's Global Car Tariffs Begin
3 MIN READ

Trump's Global Car Tariffs Begin as Broader Trade Measures Loom

Open AI Secures Record 400
1 MIN READ

Open AI Secures Record 400 Billion Kronor Investment Boost

Swedish Industry Reaches 6.4 Percent
2 MIN READ

Swedish Industry Reaches 6.4 Percent Wage Agreement Over Two Years

Genre image
1 MIN READ

Swedish Industry Sets 6.4 Percent Wage Increase in New Agreement

US Stock Markets Mostly Rise
1 MIN READ

US Stock Markets Mostly Rise Despite Tariff Concerns

EU Stands Firm Against Trump's
2 MIN READ

EU Stands Firm Against Trump's Tariff Threats, Says Swedish Minister

Latvia Secures 2.1 Billion Kronor
1 MIN READ

Latvia Secures 2.1 Billion Kronor Deal with Saab for Air Defense Systems

Renault Acquires Full Ownership of
1 MIN READ

Renault Acquires Full Ownership of Renault Nissan Automotive India

1,700 Jobs Saved as Northvolt
2 MIN READ

1,700 Jobs Saved as Northvolt Navigates Bankruptcy in Sweden

Swedish Pension Saver Loses Appeal
1 MIN READ

Swedish Pension Saver Loses Appeal in Falcon Funds Fraud Case

Huawei Reports First Quarterly Loss
1 MIN READ

Huawei Reports First Quarterly Loss in Years Following Sanctions

France Fines Apple 150 Million
1 MIN READ

France Fines Apple 150 Million Euros for Competition Violations

Maurel & Prom Shares Drop
1 MIN READ

Maurel & Prom Shares Drop 15 Percent After Venezuela License Revoked

Norwegian Oil Fund Invests 1.4
1 MIN READ

Norwegian Oil Fund Invests 1.4 Billion Euro in Offshore Wind Projects

Sweden's Wage Talks Reach Critical
1 MIN READ

Sweden's Wage Talks Reach Critical Stage as Deadline Looms

Sweden Leads Nordic Region in
1 MIN READ

Sweden Leads Nordic Region in Money Laundering, Report Finds

Swiss Varo Energy to Acquire
1 MIN READ

Swiss Varo Energy to Acquire Swedish Fuel Company Preem

German Inflation Drop Signals Potential
2 MIN READ

German Inflation Drop Signals Potential ECB Rate Cut in April

Half of Retrained Workers Shift
1 MIN READ

Half of Retrained Workers Shift to New Industries, CSN Reports

EQT-Backed Omega II Bids 54.9
1 MIN READ

EQT-Backed Omega II Bids 54.9 Billion Kronor for Fortnox

Food Prices Continue to Climb,
3 MIN READ

Food Prices Continue to Climb, but Major Increases May Be Over

Stockholm Stock Exchange Drops as
2 MIN READ

Stockholm Stock Exchange Drops as Trump's Tariff Plans Rattle Markets

Tokyo Stocks Drop Sharply as
1 MIN READ

Tokyo Stocks Drop Sharply as Trump Tariffs Loom

Trump and Starmer Discuss Progress
1 MIN READ

Trump and Starmer Discuss Progress on US-UK Trade Deal

Håkan Samuelsson Returns as Volvo
2 MIN READ

Håkan Samuelsson Returns as Volvo Cars CEO to Drive Electric Future

Security Fund Reports Fewer Layoffs,
2 MIN READ

Security Fund Reports Fewer Layoffs, Sees Hope for Skilled Workers

South Korea, China, Japan Collaborate
1 MIN READ

South Korea, China, Japan Collaborate to Boost Free Trade

Trump's Diversity Order Faces Pushback
1 MIN READ

Trump's Diversity Order Faces Pushback from European Companies

Sweden Seeks to Shield Key
2 MIN READ

Sweden Seeks to Shield Key Goods from EU-US Tariff Clash

Weekend Push for New Industrial
2 MIN READ

Weekend Push for New Industrial Agreement as Deadline Looms