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Thedéen: Likely with three rate cuts this year

It is leaning towards three cuts in the interest rate this year, according to the assessment of the Swedish Central Bank Governor Erik Thedéen. It is more likely that we will make three cuts than two cuts, he says in a speech.

» Updated: 03 September 2024, 11:37

» Published: 03 September 2024

Thedéen: Likely with three rate cuts this year
Photo: Anders Wiklund/TT

The Swedish Central Bank lowered the interest rate on August 20 for the second time this year, down to 3.50 percent. At the same time, they signaled for two or three more cuts this year, citing that inflation has decreased and the prospects for inflation in line with the Swedish Central Bank's goal look good.

What speaks for three cuts rather than two?

If these forecasts come true, we will become even more confident in the autumn that inflation is not only in line with the goal but will develop in line with the goal. And then I think it seems more likely that we will end up with three cuts, says Thedéen and emphasizes that it was his personal opinion in connection with the latest interest rate meeting.

I stand behind the decision on two or three, but leaned a bit more towards believing it's more likely with three if the forecasts come true.

The world can surprise

There are some economists who have advocated for the Swedish Central Bank to have made a double cut in August. Thedéen repeats the importance of gradually lowering the interest rate based on how the economic situation has looked in recent years.

It may be that the world surprises us again and that speaks for proceeding cautiously, he says.

Even if, for example, inflation has clearly moved downward, you can never be sure what will happen in the long run. He points, among other things, to the fact that there are still geopolitical factors that need to be kept an eye on.

Gradual is quite wise, then we get time to read this.

The path we have outlined is clearer than what almost any other central bank does, he adds.

Can affect inflation

He also points out that it will be important to keep an eye on the fragmentation of the world economy going forward.

This is something that could fundamentally change the era we have been in for many years with globalization and trade between different regions. If there is more fragmentation, that we choose trading partners based on the geopolitical development, it will have major effects.

Perhaps also on inflation, says Thedéen.

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By TTThis article has been altered and translated by Sweden Herald

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