Swedish bank lowers Sweden's economic growth forecast and expects central bank to cut interest rates twice this year to 1.75%.

The latest "Economic Outlook" report released by the Swedish Central Bank has made a significant adjustment to the forecast for the benchmark interest rate of the Swedish Central Bank: a cumulative 50 basis points cut to 1.75% by the end of the third quarter of this year, compared to the previous forecast of "25 basis points cut to 2.25% in August". This adjustment represents a major shift from the conservative forecast in the survey last month, which indicated that "most analysts expected a rate cut to 2% in the fourth quarter". The bank's economic analysis team pointed out that the largest economy in the Nordic region is currently facing triple pressure: external uncertainties caused by the Trump administration's trade policies, concerns about the stagnation of domestic economic recovery, and the persistent high core inflation that constrains monetary policy. The latest data shows that although overall inflation is showing signs of decline, core CPI, excluding energy and food prices, remains sticky, which contrasts with the weak performance indicating that GDP growth may fall below 1.5%. "The chain reaction of the US imposing tariffs cannot be ignored," the report emphasized, stating that trade frictions will impact the Swedish economy through three channels: reduced export orders, slowing business investment, and weakened consumer confidence. Based on this, the Swedish Central Bank has revised its economic growth expectations for 2025 from the previous forecast of 2.7% to 2.5%, while maintaining a growth rate of 1.5% for this year. The bank believes that tariff pressures will indirectly drive down inflation rates moderately, creating policy space for the Swedish Central Bank. For neighboring Norway, the Swedish Central Bank maintains its baseline forecast that the European Central Bank will begin cutting interest rates in September, but adds the expectation of a second rate cut in December and predicts four consecutive rate cuts to 3% by 2026. It is worth noting that the Norwegian Central Bank previously implied that it might delay the start of an easing cycle until September. Analysts point out that the policy shift by the Swedish Central Bank reflects the unique challenges facing the Nordic economies: they must guard against import-driven inflation risks while also addressing the impact of trade protectionism on export-oriented economies. As major central banks begin easing cycles, the differentiation of Nordic monetary policies may intensify market volatility.