RIKSBANK: Thedeen Puts Neutral Rate Estimate Around 2.5%

Riksbank Governor Thedeen re-iterated his view from the August minutes, that policy rates can be cut three more times this calendar year (i.e. at each of the September, November and December meetings). However, of more interest was his estimate of the neutral rate, said to be "around 2.5%".

• We have written previously on the increasing importance of the neutral rate (r*) for the Riksbank, as it embarks on a more aggeressive easing cycle than many other G10 central banks (see "SWEDEN: Increasing Importance Of r* Discussions As Riksbank Easing Progresses", Aug 27).
• This is the first point estimate/indication we have seen from Executive Board members in the present cycle.
• In last week's August meeting minutes, Deputy Governor Jansson noted that r* is "very important for how quickly one should now attempt to cut interest rates", but re-iterated well-known issues/uncertainties around its estimation.
• Thedeen also noted that the data released since the August meeting had confirmed the Riksbank's prior view. This presumably confirms that the outlook was unchanged by Q2 GDP printing at -0.3% Q/Q, five tenths above the (unreliable) flash estimate.