When the interest rate is now reduced from 3.5 percent, it is the third reduction in eight years. At most, the interest rate during that period has been 4 percent.
Wednesday’s reduction of 0.25 percentage points to 3.25 percent was in line with market expectations.
The interest rate forecast
The Riksbank states that a double reduction may be relevant at one of the two remaining interest rate announcements.
– Inflation is showing increasingly clear signs of stabilizing at the target. Therefore, we assess that we can reduce at a faster rate than previously announced, says Riksbank Governor Erik Thedéen.
The assessment is that the risk of high inflation has decreased, while the recovery is somewhat slower than expected.
– I think it is wise to proceed gradually as we are now doing. We take one step at a time, but we do it quickly, says Thedéen.
The Riksbank also assesses that further reductions may also take place during the first half of 2025. The Riksbank’s interest rate forecast now points towards a key interest rate of an average of 2.38 percent during the second quarter of 2025, which indicates two further reductions compared to the previous forecast.
In the so-called interest path, it is then inclined towards further reductions down to a key interest rate of 2.25 percent in two years.
If interest rates are lowered according to forecasts, this could mean more money in the wallet for households. In 2025, an average income household without a loan can receive SEK 2,900 more per month, while a household with a larger loan will receive SEK 3,900 per month.
– That should mean that households have room to consume more, says Thedén.
More interest rate cuts
The Riksbank already flagged at the last interest rate announcement for further interest rate cuts, which would mean that the key interest rate ends up at a maximum of 2.75 percent at the end of the year.
Starting this year, the Riksbank holds eight ordinary monetary policy meetings per year. After today’s announcement, two interest rate announcements remain; 7 November and 19 December. This means that the interest rate can be lowered further on two occasions during 2024.
– But if conditions change, it can justify a higher or lower interest rate, says Thedéen.
Watch the entire broadcast from The Riksbank’s press conference on SVTPlay.
