At the latest interest rate meeting, the Swedish Central Bank chose to lower the interest rate by 0.25 percentage points. Ahead of the meeting, the question had been raised among several economists whether an even more drastic measure, a so-called double lowering, was even relevant. Now that the protocol is being presented, it appears that this was also discussed in the board of directors.
"We have also, which is entirely natural in the current situation, in the board of directors discussed whether a lowering of the interest rate by 0.5 percentage points could be justified in the current situation," says the Governor of the Swedish Central Bank, Erik Thedéen, in the protocol.
May be necessary in certain situations
He admits that it may be relevant in certain situations, among other things to counter the risk of a clearly negative development, such as an unexpectedly large slowdown in economic activity.
"Larger lowerings of the interest rate may be needed in certain situations to quickly achieve the desired effect and counter the risk of a clearly negative development. In the current situation, where much indicates that inflation has permanently fallen to a level close to the target and where the Swedish Central Bank has a clearly communicated policy of further, gradual easing of monetary policy, I do not see the need for larger individual interest rate lowerings," says Thedéen.
Considered a double lowering
Vice Governor Anna Breman simultaneously admits that she considered a lowering of 0.50 percentage points but feels secure with 0.25 based on several reasons, including:
"Unlike 2022, the Swedish Central Bank now has eight meetings per year instead of five. This reduces the need to make lowerings in larger steps," she says.
Anna Breman also opens up for larger lowerings if the situation were to change radically.
"This includes lowerings or increases in larger steps than 0.25 percentage points if the economic outlook changes significantly and inflation risks deviating permanently from the target," she says.
