MNI RIKSBANK WATCH: Cuts 25bps, Sees 2 or 3 More Cuts In 2024

MNI ((MNI) London) - MNI (LONDON) - The Riksbank cut its key policy rate by 25 basis points to 3.5% as widely expected and stated that if inflation unfolded as expected it can cut two or three times more this year.

In June, the Riksbank Executive Board had stated that “If the inflation outlook holds, the interest rate may be lowered two or three times in the second half of the year,” so Tuesday’s announcement adds one more. The latest cut had been seen as near-inevitable given subdued inflation data.

"Inflation has developed as expected and economic activity is weak," said the Board, which is placing more weight on Sweden’s economic output now that inflation is back around target. (See MNI INTERVIEW: Riksbank Could Cut 2-3 Times More In 24-Gerlach )

With no new rate path published in August, the market attention had focussed on whether the guidance would be altered to signal a lower rate path when it is formally updated in September. The Riksbank also looks set to lower its already-subdued growth projection next month.

“The growth outlook in Sweden and abroad is somewhat weaker than in the most-recently published forecast,” it said.

In its Monetary Policy Update, which gives a brief analysis of economic developments, the Riksbank said that "various indicators, such as producer prices and company pricing plans, have continued to imply that inflationary pressures are compatible with the target.” Inflation looks set to stabilise and the policy rate is likely to be cut faster than foreseen in June.

It warned, however, that geo-political risks and the krona exchange rate could alter the picture and derail cuts.