Swedbank anticipates two interest rate cuts by the Riksbank this fall, as Swedish economic growth slows. The government's autumn budget includes significant, unfunded measures totaling 75 billion SEK, focusing on tax cuts and increased household transfers. Despite these efforts, growth forecasts for 2023 and 2024 have been lowered. SEB also adjusts its GDP predictions, citing global uncertainty and inflation concerns.
Swedbank Predicts Two Interest Rate Cuts This Fall
Swedbank Predicts Two Interest Rate Cuts This Fall
Swedbank and SEB have lowered their forecasts for the Swedish economy. However, their assessments differ regarding interest rate cuts by the Riksbank. Swedbank anticipates two cuts as early as this fall.
The Swedish economy continues to struggle, necessitating actions from both the Riksbank and political spheres. In its new economic report, Swedbank predicts that the Riksbank will implement two cuts to the key interest rate from the current level of 2.00 percent this fall. Additionally, the government is making an unusually large investment in the autumn budget.
"The government's autumn budget includes unfunded measures totaling 75 billion SEK," Swedbank states in the report.
In the budget, Swedbank expects more than half of the investments to go towards tax cuts and increased transfers to households.
Swedish growth is expected to remain at 1.0 percent this year, down from a previous forecast of 1.5 percent, according to calendar-adjusted figures in the forecast. Swedbank also lowers its growth forecast for next year to 2.3 percent from the previous 2.5 percent.
SEB is making similar adjustments in its economic report. The major bank revises its GDP forecast to 1.1 percent for 2025 (down from 1.6 in May) and 2.7 percent for 2026 (down from 2.9 in May).
Global Uncertainty
"Global uncertainty and the scars from years of soaring prices continue to weigh on household sentiment, and rising real wages or lower interest rates and tax cuts have yet to help. We still believe in a Swedish recovery but note that it seems to be delayed," says the bank's chief economist Jens Magnusson in a press release.
SEB still expects an interest rate cut in September, but no more from the Riksbank, with the key interest rate projected to return to 2.00 percent by 2027, SEB writes.
Global Uncertainty
Regarding inflation for this year, both banks slightly adjust their forecasts upwards but foresee a clear decline by 2026. Swedbank expects the most significant drop, with inflation measured by the CPIF at 1.5 percent.
Both banks also predict the same trend for unemployment, expecting a decline next year.