Thousand-kronor notes await lower interest rate

A autumn of interest rate cuts awaits and already this week, the Swedish Central Bank may strike with a double cut. At the beginning of next year, a million loan with variable interest rate may be 800 kronor cheaper per month.

» Updated: September 24 2024

» Published: September 22 2024

Thousand-kronor notes await lower interest rate
Photo: Jakob Åkersten Brodén/TT

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It is considered a given that the Swedish Central Bank will lower the interest rate on Wednesday. Everything depends on how large the reduction will be. Most analysts believe that the Swedish Central Bank management will still stop at 0.25 percentage points (25 points).

But there is a "risk" that it will be 50. And I don't say "risk" because it would harm the Swedish economy. But only because they haven't signaled it, says Nordea's chief economist Annika Winsth.

Difficult to resist

Clarity is essential for a central bank, she and her economic colleagues believe. And Riksbank Governor Erik Thedéen has pointed out that gradual reductions, rather than larger leaps, are the way forward.

But since then, several weak economic signals have come in – even lower inflation, a worse Swedish economy, and a labor market that is slowing down.

The Swedish Central Bank will have a very difficult journey to resist here. And when the Fed (the US central bank) now took 50 points, it opens up for the Swedish Central Bank to take 50, says Winsth.

Three out of five

How high is the probability then?

Winsth sees three out of five board members as potential 50-point reducers.

And if it's all three, then it will be 50. Then it's a majority.

And if not now, a double reduction (0.50 percentage points) might come in November instead, she reasons.

Her counterpart at SEB, Jens Magnusson, is on the same line.

It's absolutely impossible to rule out that it will be 50 points, he said to TT on Thursday, even if it's not his main scenario.

Thousand-kronor notes

But actually, the size doesn't play such a big role. The important thing is that the Swedish Central Bank clearly signals interest rate reductions at every meeting, four times until January, down to 2.50 percent before pausing, believes Annika Winsth. Otherwise, uncertainty is created in the Swedish economy.

What we need now is investments and employment, not uncertainty.

If that happens, then Swedish households with variable-rate mortgages will probably have an interest rate one percentage point lower than today. On a million-kronor loan, that means 10,000 kronor lower interest per year, or approximately 800 kronor per month, before interest deduction.

A loan of three million would become 2,500 kronor cheaper per month.

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

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