Sweden’s interest rate-sensitive economy was hit harder than most by the series of rate hikes in 2022/23. But following 150 basis points of rate cuts, the Riksbank’s policy easing is showing early signs of bearing fruit.
Sentiment indicators – be it consumer confidence, the purchasing managers indices, or the economic tendency survey – have shown steady improvement through 2024. The housing market is rebounding too. Remember that Sweden has a particularly high prevalence of variable-rate lending, which means that rate hikes hit more quickly than in countries, notably the US, where fixed-rate debt is more common. The same is true in reverse, and the swift delivery of rate cuts has boosted transactions, confidence and prices.
So far, that’s not been widely reflected in the hard economic data. Unemployment is no longer rising but remains relatively high, settling structurally above the pre-Covid average. Household consumption bounced in November, though it’s too early to say that this is the start of a trend.
In short, while the Riksbank is expecting a recovery in demand this year, it’s still early days. Meanwhile, inflation has continued its recent tendency to undershoot Riksbank forecasts. CPIF excluding energy came in at 2% in December, below the Riksbank’s most recent projection.
Add in the risks from US President Donald Trump’s trade war for Sweden’s relatively export-orientated economy, and we think there’s scope for both a cut next week and one more this year, ultimately taking the policy rate to 2%, slightly below the Riksbank’s forecast for the year.
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Publish date : 2025-01-21 23:02:00
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The post Sweden’s Riksbank rate cut cycle nears its end as economy shows signs of life | articles first appeared on Love Europe.
Author : love-europe
Publish date : 2025-01-22 07:54:39
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