Central Bank Economist: Central Bank Cuts Interest Rate Too Late

Good, but too late, is the comment of trade union economist Tobias Brännemo on the Swedish Central Bank's interest rate decision. That such a large reduction is coming now is a clear sign that the Swedish Central Bank realizes that they lowered too little earlier.

» Published: November 07 2024

Central Bank Economist: Central Bank Cuts Interest Rate Too Late
Photo: Anders Wiklund/TT

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This was good, right decision. But also a sign that they started too late, says the Union's chief economist Tobias Brännemo.

The weak economy, which has become weaker than many analysts, including the Swedish Central Bank, had expected, needs an extra boost from a lower interest rate. This situation could have been avoided if the interest rate cuts had started earlier and not taken unnecessary pauses along the way, according to Brännemo.

Signal to households

The signal value to households is still strong, Christmas shopping can be an important injection.

Hopefully, the economy will lift in the near future, he says.

Nordea's chief analyst Torbjörn Isaksson notes that the Swedish Central Bank is sticking to its previous forecast - that the interest rate will drop to 2.25 percent during the second half of 2025. He is also sticking to his assessment, but lower than the Swedish Central Bank, which means that Nordea is counting on three cuts to 2.00 percent by May.

Many analysts welcome the double cut, but there are doubters.

Inflation may rise

Lars Kristian Feste, rate chief at Lannebo Capital Management, believes that a 25-point cut would have been better.

The Swedish Central Bank has a little too little patience. There are not such big signs of weakness in the Swedish economy, he says to TT.

Feste assesses that a new cut, this time by 0.25 percentage points, is highly likely in December. At the same time, inflation may rise in 2025.

We assess that the Swedish economy will get a real boost during the second half of the year. If you combine that with what happens in the US with fiscal policy after the election, it can make inflation rise, he says.

Handelsbanken's economists believe that there will be two more cuts, in December and January, but that the interest rate will then bottom out at 2.25 percent.

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

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