When the Riksbank last month lowered Sweden’s policy rate to 3.50 percent, it signalled that it could cut it another two or three times – a faster rate than previously advertised.
And it’s leaning towards three times, Thedéen said on Tuesday.
“It’s more likely that we’re going to make three cuts than two cuts,” he told an audience at Swedish mortgage bank and insurance company Länsförsäkringar.
“These decisions haven’t been obvious to us at the Riksbank. They’ve slowly grown when we’ve felt increased certainty about where we’re heading,” he said.
Some economists criticised the Riksbank for only lowering the policy rate by 0.25 percentage points in its last cut, rather than 0.50 percentage points in one go.
But Thedéen said it was crucial to proceed with caution to avoid getting caught off guard anew by the geopolitical instability and global economic turmoil of the past few years.
“It could happen that the world surprises us again,” he said.
Why is the policy rate important?
The policy rate is the central bank’s main monetary policy tool. It decides which rates Swedish banks can deposit in and borrow money from the Riksbank, which in turn affects the banks’ own interest rates on savings, loans and mortgages.
If bank interest rates are high, it’s expensive to borrow money, which means people spend less and as a result inflation drops.
Future policy rate decisions are scheduled for September 25th, November 7th and December 18th.
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