Published May 5, 2024 at 10:01 a.m.
Economy. It has been nine years since Sweden took the lead internationally and cut interest rates into negative territory in 2015 – a strategy that four years later was condemned as a failure. But despite the krone crash, Sweden is expected to be ahead of the rest of the world again – in the same direction – and be the first to lower the interest rate.
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The kroner crash
- The krona crash does not prevent lower interest rates – Nordea
- The krone plummets to the worst exchange rate this year
- The krone at a new low
- The crown falls to new lows
- No word on how the crown must be saved
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Neither the European central bank, the ECB, nor the American counterpart, the Federal Reserve, have yet dared to lower their interest rate, but this week the Swedish Riksbank is expected to go ahead of the rest of the world and be the first to lower the interest rate.
A necessary rescue measure to favor mortgage borrowers, or irresponsible experimentation that will crash the Swedish krona? The experts disagree, and different experts also have very different mortgages of their own.
It is clear in any case that the measure deviates from what it looks like in other countries, which have chosen a much more conservative path towards lower interest rates.< /p>
In the USA, for example, the key interest rate is still 5.25–5.5 percent, despite CPI inflation of only 3.2 percent.
At the same time, Sweden has a key interest rate of 4.0 percent and CPI inflation of 4.1 percent.
The US dollar is record strong, while the Swedish krona is record weak against basically all of the world's other currencies.
However, none of these circumstances is expected to upset the Riksbank's plans for to cut the interest rate next week, even though it could cause export prices to skyrocket.
– If the Fed does not lower this year, it is clear that there could be a headwind for the Riksbank as well. There is a limit to how far you can pull this rubber band, says SEB's US economist Elisabet Kopelman in a SvD article with the headline “Swedes' dream of lower interest rates can be undermined” under a picture of American central bank chief Jerome Powell.< /p>
Kopelman believes that the Fed has been surprised by increased growth and better labor market figures and therefore does not know whether to dare to cut interest rates or not.
– They have been taken to bed by the new acceleration in growth, in the labor market and for inflation. I think they will be very careful, she tells SvD.
It could therefore be that the US does not lower its interest rate at all this year, while Sweden reintroduces the “Swedish dream” of lower interest rates and a new price rally in the housing market.
In that case, it is almost certain that the krona will crash against the US dollar and that import prices will rise further, which will drive inflation. It may also affect the ECB, Kopelman believes, which may not raise interest rates either.