Market Anticipates Two Interest Rate Cuts from Riksbank
Market indicators suggest two interest rate cuts by Sweden's Riksbank, responding to economic downturn signals.
Key Points
- • First interest rate cut could occur in August 2025.
- • May retail sales experienced the largest decline since 1994, impacting confidence.
- • 50% chance of another interest rate cut according to Riksbank forecasts.
- • Variable mortgage rates around 3% may decrease, saving borrowers 15,000 SEK on average.
Sweden's financial markets are increasingly betting on two potential interest rate cuts from the Riksbank, with the first cut possibly arriving as soon as August 2025. This shift in market sentiment comes in response to a series of disappointing economic indicators, including the weakest retail sales numbers recorded in May since 1994, which have raised concerns about the overall economic climate.
The most recent data portrays a stark decline in consumer spending, prompting analysts like Amanda Sundström, a rate and currency strategist at SEB, to highlight how this downturn reflects diminished consumer confidence. Additionally, decreases in producer prices and corporate pricing plans further support the prediction of lower inflation rates in the future.
According to the Riksbank's latest forecasts, there is a 50% probability of an interest rate reduction this year, and several board members have indicated openness to further easing if inflation rates allow. Market analysts believe that our current variable mortgage rates hovering around 3% could significantly benefit from these anticipated cuts. A 0.5 percentage point decrease in rates could translate to savings of approximately 15,000 SEK annually on a 3 million SEK mortgage, making home financing more affordable for many Swedes.
As the economic indicators continue to evolve, SEB is projecting that a rate cut in September is also possible, particularly if the long-term trend of declining interest rates persists. The combination of weak retail performance and easing inflationary pressures suggests that the central bank’s monetary policy will likely shift towards providing more support to stimulate economic growth in the coming months.