The bank is lowering its growth forecast for this year to 1.2 percent, down from the previous forecast of 1.5 percent. However, for 2025, the forecast is raised to 2.4 percent, up from 2.0 percent.
"Looking ahead, households can expect significantly lower interest expenses and noticeably lower income taxes, as announced by the government, which will boost real income growth," writes Danske Bank.
Continued decline in inflation
As for inflation, it is still pointing downwards, both for CPIF inflation, which they believe has established itself below the Swedish Central Bank's target level of 2 percent, and core inflation, according to Danske Bank.
Their forecast for CPIF inflation in 2025 is lowered to 0.6 percent, compared to the previous 1.0 percent.
The Swedish Central Bank is expected to lower the repo rate six times in six meetings until March next year, according to Danske Bank's economists. This would bring the repo rate down to 2 percent by the summer of 2025, from today's 3.50 percent.
The Swedish Central Bank is thus expected to move faster and further than the European Central Bank (ECB) when it comes to interest rate cuts. The interest rate differential that is likely to arise against the ECB will not stop the Swedish Central Bank, according to Danske Bank.
"Not a temporary dip"
"Our forecast indicates that inflation will remain well below the 2 percent target for a foreseeable future. This is not a temporary dip but a more sustained trend, which provides room for a continued expansionary monetary policy that can strengthen the economy further," says Danske Bank's chief economist Michael Grahn according to the press release.
Unemployment is expected to rise to 8.4 percent this year, up from 7.7 percent last year, according to the new Danske Bank forecast. A slight decline is expected in 2025, down to 8.2 percent.
