On Friday, new figures are expected to show that inflation continued to fall in May.
The announcement could be crucial for when the Riksbank lowers the interest rate again.
Inflation is an important piece of the puzzle ahead of the Riksbank's interest rate decision in about two weeks – which in turn is crucial for all debt-burdened Swedish households going forward.
The KPIF inflation, where the effects of mortgage rates are excluded, is expected to fall to 2.1 per cent in May. This can be compared with 2.3 per cent in April and the peak of 10.2 per cent when the inflation shock was at its worst in December 2022.
The Riksbank's target of 2 per cent in KPIF inflation.
In principle, no analyst believes that the Riksbank will offer any interest rate cut in the announcement on 27 June. Riksbank Governor Erik Thedéen has, after the first rate cut in eight years at the beginning of May, in a series of statements, made a great effort to tone down the likelihood of this.
However, further interest rate cuts are expected in the autumn, if the inflation trend continues and inflation expectations do not go in the wrong direction.
And the cuts will continue next year, according to SEB's economists, who expect the Riksbank to have lowered the interest rate to 2.25 per cent by the end of 2025. This interest rate level is described as a new normal level where the rate neither stimulates nor brakes economic activity.
According to Sundström, one can say that Swedish households, by accepting relatively moderate wage increases during the inflation shock – i.e., significant falls in real wages – have paved the way for the interest rate cuts that are now expected. This has reduced price pressure in the Swedish economy compared to neighbouring countries like Norway.
Aside from the May inflation figures on Friday, Thursday's major report on inflation expectations from Prospera is important for guiding the Riksbank ahead of future interest rate decisions, according to Sundström.
The average forecast points to an inflation rate of 3.4 per cent in May, down from 3.9 per cent in April, according to Bloomberg's compilation of forecasts.
The KPIF inflation, where the effects of mortgage rates are excluded, is expected to fall to 2.1 per cent. This can be compared with 2.3 per cent in April and the Riksbank's inflation target of 2 per cent.
Looking at the underlying KPIF inflation, where energy prices are also excluded, the average forecast is 2.7 per cent in May, down from 2.9 per cent in April.
At its latest monetary policy meeting at the beginning of May, the Riksbank lowered the interest rate for the first time in eight years, down by 0.25 percentage points to 3.75 per cent. The next interest rate decision from the Riksbank is expected on 27 June.
The Riksbank's interest rate sets the tone for the interest rate environment in the Swedish economy, among other things by affecting households' variable mortgage rates and what companies have to pay for their loans.
The Riksbank's board expects – if the bank's inflation forecasts are correct – to be able to lower the interest rate twice before the end of the second half of 2024. The probability in the pricing on the interest rate market also points in this direction, while many economists believe that the Riksbank is overestimating the inflation threat in its forecasts and that there will be more cuts already this year.
If the interest rate on a mortgage loan decreases by 1 percentage point, it means that the cost of a mortgage loan of three million decreases by 30,000 kronor per year or 2,500 kronor per month before interest deductions.
