The crown crash does not prevent lower interest rates – Nordea

Published 31 March 2024 at 13.13

Economics. The weak krona will not prevent the Riksbank from going ahead of the ECB and lowering the policy rate more times than the three they officially claim to be planning this year. Nordea's chief economist Annika Winsth makes that assessment in a new forecast.

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Nordea's chief economist believes that the first interest rate cut will come in May and that the interest costs until then continues to increase for Swedish households.

“At the same time as the cost of living has risen sharply and inflation continues to rise, albeit at a slower pace. To that must be added a deteriorating labor market, which usually affects households' confidence in the future negatively,” writes Winsth in his forecast.

According to her, there is a great risk that the recession will be significantly deeper, with rapidly rising bankruptcies and higher unemployment, if the Riksbank does not lower interest rates several times this year. Nordea's chief economist therefore does not believe that the weak krona will prevent the Riksbank from going further with its cuts than the ECB is doing.

“However, many are worried that the weak krona will prevent the Riksbank from lowering the key interest rate before the ECB . Nordea's assessment is that the inflation target will be reached this spring and that inflation will be below the target from this summer. In that context, today's exchange rate level should not be a major obstacle for the Riksbank,” writes Annika Winsth.

Krone crash

• The krone crashes to the worst exchange rate this year
• Crown at new low
• Crown falls to new bottom level
• No word on how to save the crown
• "The government must intervene" to save the crown from ruin

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