The Swedish central bank is cutting interest rates again

“Inflation is stabilising and economic activity is weak,” the Riksbank statement said. The Swedish central bank also announced that “if the inflation outlook remains unchanged”, it could cut rates two or three more times by the end of the year, i.e. loosen monetary policy more quickly than planned in June.

Swedish economy: weak GDP growth, declining consumption, rising unemployment

Cutting rates helps to curb consumer inflation. In July, it was 2.6%, remaining at the same level as in June, the lowest since September 2021. Inflation in Sweden peaked in December 2022 at 12.3%.

– The situation of Swedish central bankers is clearer than that of most monetary authorities in the world. This is definitely not an enviable position. The economy has been on the brink of recession for many quarters and GDP will grow by approximately 0.5% over the course of the year. yes/s. Consumption is collapsing and is aggravated by the weakness of the labor market, illustrated by the increase in the unemployment rate to 9%. With inflation under control, rapid and decisive support for the economic situation is needed. The weakness of the Swedish krona, which in the past had a significant impact on the decisions of central bankers, points out Bartosz Sawicki, analyst at Cinkciarz.pl.

How much further can the Riksbank cut interest rates?

– Looking ahead, there will be little significant economic data ahead of the Riksbank’s next meeting next month. Therefore, we think another rate cut is already certain, given the projections put forward by policymakers. We expect rates to be cut at every Riksbank meeting until the end of this year, as survey data suggest further moderation in core and services inflation. We believe policymakers will want to ease monetary policy to support the weakening economy, says Adrian Prettejohn, economist at Capital Economics.