Danske Bank sees Riksbank rate cut to 1.75% in November

Danske Bank sees Riksbank rate cut to 1.75% in November

Danske Bank has revised its economic outlook for Sweden, predicting that the Riksbank will lower its policy rate to 1.75 percent by November. This downward revision from the previous estimate of a 2 percent floor is a significant change in the bank's outlook for the Swedish economy.

The new projection, as detailed in Danske Bank's latest economic outlook report, is based on a series of economic indicators that have deteriorated over the summer. The bank notes that layoffs have risen, the number of new job vacancies has declined, and confidence indicators remain subdued. However, there are some glimmers of hope, as seen in the Economic Tendency Survey from the National Institute of Economic Research (KI) [1].

Danske Bank's projection for Sweden's calendar-adjusted GDP growth has been revised downwards. The bank now expects GDP to grow by 1.1 percent this year, compared to its earlier forecast of 1.6 percent in early June. For next year, growth is expected to reach 2 percent, down from the previous estimate of 2.5 percent.

Inflation projections have also been adjusted. Danske Bank now expects KPIF inflation to reach 2.7 percent this year and 2.1 percent next year, compared to its previous forecasts of 2.3 and 2 percent, respectively.

The bank attributes the need for a rate cut to the current economic conditions, stating that the Swedish economy has performed worse than expected. Despite low resource utilization, inflation remains well above target, and the relationship between demand and inflation appears weak. The Riksbank began its rate-cutting cycle last May, and it is only now that the full effects of these cuts are being felt in the economy.

In a separate development, Fed member Christopher Waller has announced his support for an interest rate cut in September, with expectations for additional cuts within the next three to six months. Waller, who is considered a potential candidate for the next Fed President, cited core inflation running near 2 percent and the risk of undesirable labor market weakness as reasons for his stance [2].

These developments highlight the evolving economic landscapes in both Sweden and the United States, with central banks responding to changing economic conditions and pressures from political leaders.

References:
[1] https://www.marketscreener.com/news/danske-bank-predicts-riksbank-to-cut-policy-rate-to-1-75-percent-economic-outlook-ce7d59dada80fe23
[2] https://en.bitcoinsistemi.com/fed-chair-candidate-announces-interest-rate-cut-expectations-within-3-6-months/