Sweden's Central Bank Expected to Cut Policy Rate by 0.25% on August 20, Analysts Predict Further Cuts Before Year-End
In a recent poll of analysts by Multibagger, all 16 experts anticipate a 0.25% cut in Sweden's policy rate on August 20, with expectations for the rate to end the year at 3.00% and potentially fall even lower in early 2025. Adrian Prettejohn, Europe Economist at Capital Economics, stated that weaker-than-expected inflation and activity data may prompt the central bank to make the initial cut from 3.75% to 3.50%, with indications of additional cuts totaling at least 50 basis points later in the year.
Following the first rate cut in eight years in May, the central bank held the rate steady at 3.75% in June but hinted at the possibility of up to three more cuts by year-end due to diminished price pressures. Headline inflation has been gradually decreasing from its peak of over 10% in 2022, falling below the central bank's 2% target for the past two months. The economy has also shown signs of slowing, with various sectors experiencing weakness in the second quarter.
While concerns about the impact of rapid rate cuts on the crown and inflation have somewhat subsided, some analysts still foresee the potential for quicker cuts in Sweden this year. Nordea economist Torbjorn Isaksson predicts a total of four rate cuts by the end of the year, leading to a policy rate of 2.75%, with the possibility of an additional cut early next year.
However, with inflation persisting in the euro zone and the European Central Bank expected to cut rates only twice more this year, Swedish rate setters may proceed cautiously. Meanwhile, Norway's central bank opted to maintain its key rate on August 15, citing the need for a tight stance to combat inflation.
The Riksbank has three more rate-setting meetings scheduled for this year after August 20, with the next meetings in September, November, and December. The policy decision will be announced at 0730 GMT.
In conclusion, the anticipated rate cuts by Sweden's central bank could have significant implications for the country's economy and financial markets. Investors should stay informed about these developments as they may impact various sectors and influence investment decisions.