In the broker’s recent morning report, it is assumed that the Riksbank will cut the interest rate by 25 basis points, to 3.75 per cent.
At the previous interest rate meeting in March, Sweden’s central bank governor, Erik Thedéen, stated that “the need for a tightening monetary policy diminishes when inflation falls towards the target and economic activity is weak. If the inflation outlook continues to be promising, the interest rate can probably be cut in May or June.”
In the time since the meeting, the underlying inflation has been clearly on the downside of the Riksbank’s estimate, while the GDP figures testify that a mild recession has turned into stagnation – as the central bank had expected, writes DNB Markets.
A further increase in unemployment, to 8.6 per cent in March, also points in the direction of an interest rate cut now, it is pointed out.
The monetary policy committee may choose to wait, in that case primarily because expectations of delayed interest rate cuts in the USA contribute to negative pressure also on the Swedish krona, which in turn may give rise to unwanted inflationary impulses.
The market has priced in approximately a 70 percent probability of a cut today.
13 out of 20 analysts in Bloomberg’s survey expect the same, while the remaining seven think the central bank will wait.
