STOCKHOLM (Reuters) -Sweden’s central bank cut its key interest rate by quarter of a percentage point to 2.50% as expected on Thursday, but said that after easing policy five times this year, it saw reasons to be more cautious as it enters 2025.
The Swedish economy has been treading water for the past two years after the Riksbank jacked up rates to fight surging inflation – which peaked at around 10% in late 2022.
The central bank started cutting rates again in May and inflation is now below its 2% target. But while households and businesses remain wary about spending, inflation has edged up again in recent months.
“If the outlook for inflation and economic activity remains unchanged, the policy rate may be cut once again during the first half of 2025,” the Riksbank said in a statement.
“The interest rate has been reduced rapidly and monetary policy affects the economy with a lag. This argues for a more tentative approach when monetary policy is formulated going forward.”
Governor Erik Thedeen said the outlook for rates was broadly the same as the central bank had indicated before it made a larger-than-usual half-percentage-point cut last month.
“We are signalling the same cuts as we did in September and November, or if anything slightly more,” Thedeen told reporters.
“We speeded up the cuts at the end of this year and now it’s reasonable to wait to see their effects.”
The Swedish crown strengthened after the announcement.
“We now expect just one more 25 basis point cut next year, in March, as we think the economy will start to pick up soon, dissuading policymakers from too much more policy loosening,” Adrian Prettejohn, Europe Economist at Capital Economics said.
Analysts in a Reuters poll had been unanimous in seeing a quarter-point cut. They forecast two more cuts in the first half of next year with the policy rate stabilizing at 2.00%.
Norway’s central bank kept its key rate on hold on Thursday.
The Bank of England will announce its policy decision later in the day.
Source: Economy - investing.com
