Why don't you lower with bigger steps right now?
We believe it's reasonable to move at a faster pace, but we're not doing everything at once, that would be too risky, says Thedéen in an interview with TT.
Critics think you're moving too slowly.
I don't agree with that. According to our main forecast, we will have lowered by 1.25 percentage points by the end of the year. That's a very rapid reduction in 7-8 months, compared to what most other Western central banks have done and compared to the great uncertainty that exists.
4-5 reductions to come
And according to Thedéen, it wasn't close to a 50-point reduction right now. No, all five members of the Swedish Central Bank's board were unanimous.
Overall, the Swedish Central Bank currently assesses that the repo rate should be lowered by between 0.50 and 0.75 percentage points by the end of the year, "if the outlook holds", and possibly including a double reduction. But the main scenario is still two reductions of 0.25 percentage points each, according to Thedéen.
And we're adding that there may be one or two reductions in the first half of next year, he says.
The reason the Swedish Central Bank is increasing the pace of its planned reductions is a safer belief that inflation is being fought, for this time. And that the economy has slowed down further.
We had thought that household consumption would have picked up more than it has, which gives some concern and is an important reason why we're stimulating more now, says Thedéen.
"Affects household behavior"
In a year's time, the repo rate could be at 2.25 percent, if you believe the Swedish Central Bank's forecasts.
And that can affect household behavior quite a lot, says Thedéen, who expects households to start consuming more and thus boosting economic growth.
But as always, the Swedish Central Bank is including a number of uncertainty factors, the rate may be both lower or higher than currently forecast.
"There are risks associated with, among other things, the recovery in the Swedish economy, geopolitical uncertainty, and the exchange rate of the krona, which can lead to a different development of inflation and the formation of monetary policy", writes the Swedish Central Bank.
The Swedish Central Bank's economists are lowering their forecast for CPIF inflation to 1.7 percent this year, from previously 2.0 percent. For 2025, the forecast is lowered to 1.6 percent in CPIF rate, from previously 1.8 percent, according to a new monetary policy report prepared in connection with the interest rate meeting.
The Swedish Central Bank's inflation target is 2.0 percent, measured as CPIF where interest rate effects are excluded.
The central bank is also lowering its GDP forecast for 2024 to a growth rate of 0.8 percent, from previously 1.1 percent. For 2025, the growth forecast is raised to 1.9 percent, from previously 1.7 percent.
The unemployment forecast for this year is adjusted down to 8.4 percent, from 8.5 percent. But for 2025, it will be an upward adjustment to 8.4 percent, from previously 8.3 percent.
Source: The Swedish Central Bank
