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

Share this article

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

Author

TTT
By TTEnglish edition by Sweden Herald, adapted for local and international readers

More news

Extended Nuclear Shutdown Raises Electricity Prices in Southern Sweden
2 MIN READ

Extended Nuclear Shutdown Raises Electricity Prices in Southern Sweden

Price Pressure Reduces Alibaba's Second Quarter Profit
1 MIN READ

Price Pressure Reduces Alibaba's Second Quarter Profit

Ikano Bank Reports Loss Amid 670 Million Kronor Credit Losses
1 MIN READ

Ikano Bank Reports Loss Amid 670 Million Kronor Credit Losses

Norway and US Senator Clash Over Oil Fund's Caterpillar Divestment
1 MIN READ

Norway and US Senator Clash Over Oil Fund's Caterpillar Divestment

Tesla Denied New Charging Stations Amid Swedish Union Strikes
1 MIN READ

Tesla Denied New Charging Stations Amid Swedish Union Strikes

Cook vs. Trump: Federal Reserve Board Dispute in Court Today
2 MIN READ

Cook vs. Trump: Federal Reserve Board Dispute in Court Today

Stockholm Stock Exchange Sees Continued Decline
1 MIN READ

Stockholm Stock Exchange Sees Continued Decline

Saab to Develop Unmanned Underwater Vehicle for FMV
1 MIN READ

Saab to Develop Unmanned Underwater Vehicle for FMV

Swedish Economy Shows Recovery with Revised GDP Growth
1 MIN READ

Swedish Economy Shows Recovery with Revised GDP Growth

Academedia CEO Unconcerned About Potential Social Democratic Government
2 MIN READ

Academedia CEO Unconcerned About Potential Social Democratic Government

US Ends Duty-Free Exemption for Small Package Imports
1 MIN READ

US Ends Duty-Free Exemption for Small Package Imports

Swedish Investors Shift Focus from Defense Stocks Amid Peace Talks
2 MIN READ

Swedish Investors Shift Focus from Defense Stocks Amid Peace Talks

Consumer Agency's Proposed Telemarketing Ban Could Cost Thousands of Jobs
2 MIN READ

Consumer Agency's Proposed Telemarketing Ban Could Cost Thousands of Jobs

Asian Stock Markets Mostly Rise in Early Friday Trading
1 MIN READ

Asian Stock Markets Mostly Rise in Early Friday Trading

US Stock Market Rises Despite Urban Outfitters' Sharp Decline
1 MIN READ

US Stock Market Rises Despite Urban Outfitters' Sharp Decline

Swedish Hemp Cultivation Doubles, Reaches Record Levels
1 MIN READ

Swedish Hemp Cultivation Doubles, Reaches Record Levels

Opposition Criticizes Swedish Government's 2026 Budget as Desperate Move
2 MIN READ

Opposition Criticizes Swedish Government's 2026 Budget as Desperate Move

Sweden Can Afford Economic Investments Says Swedbank Economist
2 MIN READ

Sweden Can Afford Economic Investments Says Swedbank Economist

Fed Board Member Lisa Cook Sues Trump Over Dismissal Attempt
1 MIN READ

Fed Board Member Lisa Cook Sues Trump Over Dismissal Attempt

Svantesson Announces 80 Billion Kronor Budget Initiatives for 2026
2 MIN READ

Svantesson Announces 80 Billion Kronor Budget Initiatives for 2026