They have completely different expectations – it's like apples and oranges

The inflation rate continues to fall in Sweden. According to Statistics Sweden (SCB) the CPI for November 2024 was 1.6% compared to November 2023 and the CPIF for the same period is 1.8%, which means that Sweden's central bank AKA the Riksbank once again misses its inflation target of 2%.

Exactly one week after the announcement by Statistics Sweden, the Riksbank announced that it would lower Sweden's policy rate by 25 basis points to 2.5%, which was in line with expectations according to the Swedish newspaper Aftonbladet. According to the Riksbank's press release, the interest rate is being lowered quote "to provide further support to the economy and help stabilize inflation at the target" unquote.

At the same time, the Riksbank points out that the inflation and economic situation remains uncertain due to geopolitical concerns, uncertainties around trade policy and government crises around Europe, which clarifies their strategy of a more restrained strategy regarding future cuts in the policy rate. Unlike the market, which had hoped for hints of more and faster interest rate cuts in early 2025.

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Few surprises

The various monetary policy decisions and news poured in yesterday. First up was The Central Bureau of Statistics (SCB) which published its "fast CPI" for the second time. SCB states that inflation rose faster than expected. CPIF for October rose to 1.5% compared to 1.1% in September. An increase to 1.3% was expected according to Trading Economics. The CPI also rose more than expected, landing at 2.1%. Inflation unchanged at 2.0% was expected. The outcome means that inflation is below Riksbanken's inflation target of 2% for the fifth month in a row.

Secondary out was the Swedish central bank AKA Riksbanken which lowered the Swedish policy rate by 50 points, which was completely in line with expectations. This was the biggest change in more than 10 years. Erik Thedéen, governor of Riksbanken, who always warns of uncertain times, specified this time that the various tariffs that the newly elected US president promised to introduce on products manufactured outside America during his election campaign could lead to increased inflation.

However, the problem that arises when you have shouted "Wolf!" at every previous press conference and used every superlative in the dictionary is that it becomes harder to get your message across when it really matters.

Finally, it was time for the American equivalent of the Swedish central bank, the Federal Reserve, and its chairman Jerome Powell to also fulfill the set expectations and lower the US policy rate by 25 points. In addition to Riksbanken and FED, the Bank of England also lowered its policy rate by 25 points yesterday, from 4.75% to 5%.

Countries all over the world have been struggling with rising inflation and more countries aside from the US and Sweden are starting to see results. That the world would have to fight against unusually high inflation after the pandemic was already clear in 2020. In addition to the fight against inflation, many countries, including Sweden, are still suffering from shortages of certain products as a result of the pandemic when China completely shut down their country. I really hope that all the companies that said they intend to move their operations either home or to other countries fulfill on their promises.

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Exciting times await

Next week will be eventful in more ways than one. The outcome of the US presidential election will have a major impact on the Swedish krona's exchange rate, even if the market has already started to "price in" one of the candidates, reports the Swedish online newspaper Dagens PS Media AB.

Provided that a winner is decided on Tuesday or possibly early Wednesday morning Swedish time (GMT+2), Sweden will have one day's rest before the next important decision is published, namely the Swedish inflation figures for October and the Swedish centralbank AKA Riksbanken's decision on the policy rate.

The Central Bureau of Statistics (SCB) published for the first time last month a so-called "fast CPI", which is published about a week before the determined result. This time the "fast CPI" for October is published on 7 November 2024 at 8 a.m., while Riksbanken publishes its monetary policy decision including the policy rate on the same day at 9.30 a.m., i.e. 90 minutes later. I assume that SCB and Riksbanken exchange information with each other, which is not obvious in Sweden where strict secrecy prevails between the various authorities.

For example, the Swedish newspaper Expressen revealed that an internationally wanted gang leader and also one of Sweden's most feared criminals voluntarily contacted the Tax Agency, Sweden's equivalent to the IRS, and announced his whereabouts and received help with important documents. The newspaper's review also shows how the authority has long ignored several alarms about the notorious gang leader.

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It is best that Riksbanken makes good on its "promises"

The announcement that the Swedish central bank AKA Riksbanken is lowering the policy rate by 25 points is in line with their own forecast and the market's expectations. Riksbanken's approach may be a procedure to show itself strong towards the market and that they prioritize their trust in their own forecasts as opposed to what the Swedish economy actually needs. With this demonstration of strength, Riksbanken can take too lightly the new Riksbank Act, which states that they must also take real economic considerations into account.

Everything in the Swedish economy points to the fact that today's policy rate announcement should have been a double cut, which may give rise to harsh criticism of Riksbanken and its governor in the future, depending on how hard the Swedish economy is hit due to Riksbanken's gradual and cautious single policy rate cut.

However, the board's new policy rate forecast stands out. Quote "If inflation and the economic outlook hold, the policy rate may also be lowered at the two remaining monetary policy meetings this year. A reduction of 0.5 percentage points at one of these meetings may be relevant," unquote writes Riksbanken in a press release.

In addition, central bank governor Erik Thedéen is also open to further reductions into 2025. Quote "Furthermore, the forecast indicates one or two further rate cuts in the first half of 2025. The policy rate is thus expected to be lowered at a clearly faster rate than previously communicated, which contributes to a stronger economy and inflation close to the target." unquote. Riksbanken's new goal is for the policy rate to be 2.25%.

I was wrong

The US central bank, the Federal Reserve (FED), made a double reduction and lowered the policy rate by 50 basis points. The Federal Open Market Committee (FOMC) was divided in its decision on the policy cut, Michelle Bowman wanted to cut the policy rate by 25 basis points. According to The FOMC, two more cuts are expected later this year. The forecast for 2025 is a total of four reductions in the policy rate.

The FOMC writes in the statement that before future considerations about further adjustments in the target range for the FEB's funds rate (the policy rate) FOMC will carefully evaluate incoming data, how the outlook develops and the balance of risks. The FOMC emphasizes that they have become more convinced that inflation is moving steadily towards 2%, they also assess that the possibilities of reaching the employment and inflation targets are broadly balanced.

In the statement, the FOMC wrote quote "The economic outlook is uncertain, and the Committee is alert to risks to both sides of its dual mandate (price stability and maximum sustainable employment)" unquote. Stock markets rise after the announcement.

I wish they would grow a pair

Tomorrow, the Federal Reserve (FED) will announce whether they intend to cut the policy rate this time. The market expects a decrease of 25 points. As a non-US resident, it's harder to feel the currents in society without boots on the ground, so I agree with market expectations and assume the FED will cut the policy rate by 25 points.

On Thursday next week, Sweden's central bank AKA Riksbanken will publish its latest decision on the Swedish key interest rate. As a Swedish resident, this decision is much easier to predict. Even if it is a malptractice by Riksbanken NOT to make a double reduction, 50 points, I am convinced that Riksbanken and its head Erik Thedéen are far too spineless as usual to dare to take such a measure. However, it is set in stone that Riksbanken will make a 25 basis point cut next week, especially given the latest inflation report on 12 September.

Unfortunately, I think last month's and this month's upcoming drop will come too late to affect any of the notices currently in place. In my opinion, almost all notices will probably be executed and the biggest reason for that is that Riksbanken has reacted far too late again.

I shall keep my fingers crossed

A cut in the US policy rate is approaching, reports Bloomberg with reference to the protocol of the Federal Reserve (FED) published on Wednesday evening (GMT+2). According to Bloomberg, a prominent majority of members of the FED's interest committee are in favor of a cut at the September meeting. There were members of the committee who already wanted to lower the US policy rate in July, Bloomberg continues.

Let's hope that Bank of America Corporation Common Stock (BAC) gets its forecast right, indicating that the FED's efforts to bring down US inflation seem to have worked and that the FED will be more responsive to its surroundings than the Swedish central bank.

You never EVER postpone a tax payment

This morning at 9:30 a.m. (GMT+2) the announcement came from Sweden's central bank AKA Riksbanken that it is lowering the policy rate by 25 basis points to 3.5%. The disappointment is great among all actors who had hoped for 50 points, i.e. a double reduction. This will most likely deepen and prolong the ongoing Swedish recession.

Unemployment increases daily with both notices and layoffs. Bankruptcies have also increased. During Covid-19, companies that suffered from a lack of liquidity and declining sales could apply for postponement of the payment of various taxes. This deferment ends on September 11, 2024, which means that all taxes are due for payment as of September 12, 2024. I suspect bankruptcies will increase next month.

In Sweden, taxes are personal, which means that in the event of bankruptcy, all taxes that a company owes to the Swedish state are transferred from the company to the board. In reality, this means that many business owners who will have to file for bankruptcy next month will also have a large personal tax debt.

A message that hardly changed anything, for us

America's central bank, the Federal Reserve (FED), yesterday chose to leave the policy rate unchanged in the range of 5.25-5.5%, in line with expectations. Federal Reserve Chairman Jerome Powell has previously said he wants to see clear evidence that inflation is approaching the 2% inflation target before any rate cuts can be considered.

The personal consumption expenditures (PCE) result was higher in June at 2.5%, compared to what analysts had expected, although it was down from May, which was 2.6%. PCE is a measure of spending on goods and services by people in the United States, and is the measure that the FED attaches importance to when deciding whether to raise or lower the policy rate.

We have a mix of stocks that benefit from either a lower or a higher policy rate, so overall our portfolio is not significantly affected by this announcement. The strengthening of the Swedish krona over the past 2 days has done significantly more damage to the value of our portfolio.

Of our four worst paying months of the year, August comes in 2nd place, with only November performing better. The absolute worst month of the year is February. It will be exciting to see how much better February 2025 will be compared to 2024.

Empty promises

The monetary policy announcement from Sweden's central bank AKA Riksbanken yesterday morning was completely in line with the market's expectations, the policy rate was left unchanged. To soften the blow, Riksbanken "promised" to lower the policy rate 2-3 times later this year. A promise as set in stone as the meteorologist's weather report for next week.

The risk of lowering the policy rate just before the summer is that the Swedish krona is likely to lose further value against the EUR and USD, causing Riksbanken to take the cowardly way out to avoid criticism when the Swede's holiday abroad become significantly more expensive.

New events, new conclusions

For the first time since 2019, the European Central Bank (ECB) today cut the policy rate by 25 basis points, which was completely in line with the market's expectations. This increases the chances that Sweden's central bank will make another reduction in the Swedish policy rate at the next monetary policy announcement on June 27, 2024.

Before today's cut by the ECB, I believed in a 25 basis point cut from the Swedish central bank at the earliest at the August 19th monetary policy announcement, but now I have to revise that thought.

I now believe and hope that Sweden's central bank acts already at the end of this month in an attempt to get Sweden's economy going again.

There might be dark times ahead

Today, Sweden's central bank lowered the policy rate by 25 basis points despite being "warned" by various central banks and credit institutions around the world. The purpose of the "warnings" is not really established. That the foreign central banks are worried that the demand for them to also lower their policy rates is increasing or that they intend to speculate in the Swedish krona could be some of the alternatives.

The coming weeks may be problematic for the Swedish krona.

Even the AI doesn't understand what they want

The decisions of the Swedish central bank AKA Riksbanken have been irrational for the past decade. Many financial advisors and others expected to see a rate cut at the latest monetary policy announcement.

A comparison service, Zmarta, had the virtual machine ChatGPT4 analyze Riksbanken's monetary policy reports. According to that AI analysis, there is a 70% chance of a rate cut at the central bank's next monetary policy announcement on May 2, 2024.

Handelsbanken, One of Sweden's largest commercial banks, has made its own analysis without the involvement of AI and assesses that there is only a 56% chance of an interest rate cut.

Riksbanken has been so irrational in its decisions that the only logical explanation is that they have made the decisions with Rock-Paper-Scissors.

A central bank that uses its interest rate weapon against its own citizens

Sweden's central bank AKA Riksbanken announced today its decision to leave the policy rate unchanged for the second time in a row. In the publication, Riksbanken also informed that they intend to lower the policy rate three times within the next twelve months.

The next publications from Riksbanken on the remaining monetary policy decisions in 2024 will be submitted according to the dates below:

May 8

June 27

August 20

September 25

November 6

December 18

My assumption is still that the first policy rate cut will come on August, 20. I believe that Riksbanken intends to use the policy rate as a tool to prevent Swedish borrowers from living an overly extravagant life during the upcoming summer holidays, which in the worst case will lead to inflation gaining momentum again.

With today's interest rates, the majority of Swedish borrowers must prioritize interest payments over travel and consumption.

I can understand why they choose to wait

Full transparency, I voted for the incumbent Conservative government.

Yesterday, Sweden's central bank AKA Riksbanken announced its latest decision on the key interest rate. In line with the previous meeting, Riksbanken left the key interest rate unchanged at 4%, which is the highest level since 2008.

At the last meeting on 24 November 2023, Riksbanken warned that further increases in the key interest rate may come before reductions are considered. A reduction in the key interest rate could not come until the second half of 2025 at the earliest, Riksbanken said at the time.

In the press release from yesterday, Riksbanken confirmed that Swedish inflation has fallen and that activity in the economy has slowed down. They want to see this continue before they lower the key interest rate.

I fully understand that Riksbanken wants to wait a couple of months to ensure that inflation does not rise again. In my opinion, there is a risk of inflation picking up again due to our current government choosing to raise the energy tax at the beginning of this year instead of lowering it as promised.

Another factor that will affect inflation in the short term is that all cargo ships going around Africa and the Cape of Good Hope instead of using the Suez Canal. A sea route that around 30% of all the world's freighters used to use. The reason for this is that the Iran-backed Houthi movement, which controls parts of Yemen, is attacking cargo ships.

The next monetary policy announcement from Riksbanken is on 27 March 2024. Hopefully they will lower the key interest rate then.

Hope for the best

On Thursday, February 1, 2024, Sweden's central bank will present the year's first monetary policy announcement on the key interest rate.

The last time Sweden's central bank AKA Riksbanken announced a monetary policy statement was on November 29, 2023, when they left the key interest rate unchanged at 4%.

No one expects a cut in the key interest rate on Thursday, but an indication that a cut could come in the near future.

It will be exciting to watch the partially televised press conference. For the Swedish economy, I sincerely hope that there will be some sign of a possible future interest rate cut in the near future.

It is far too "adulting" to want to watch a televised press conference from the central bank.

I was wrong

Sweden's Central Bank AKA Riksbanken chose not to raise the key interest rate. It remains at 4% but, according to central bank governor Erik Thedéen, may be increased in the future.

However, many experts believe that Sweden has reached the end of the increase and predict that Riksbanken will instead lower the policy rate in 2024. Riksbanken themselves say that a reduction in the key interest rate will come in the second half of 2025 at the earliest.

Nevertheless, what Riksbanken says should be treated with caution since the previous central bank governor, Stefan Ingves, said as late as April 2021 quote "Riksbanken estimates that the key interest rate will remain at 0% until 2024" unquote.

They haven't learned anything...

That the Swedish central bank, Riksbanken, would raised its policy interest rate by 25 basis points yesterday was a no-brainer.

Although I personally believe that Riksbanken has failed in its mission for many years, I have to give them credit for being consistent. Yesterday's attempt to strengthen the Swedish krona was as toothless as the previous ones.

The most absurd thing yesterday was not the increase itself, but Riksbankens governor Erik Thedéen's statement in an interview. He said quote "You should continue to gain height because it could get worse" unquote.

Which literally means that Riksbanken intends to continue with its toothless increases instead of trying to find other approaches to strengthen the Swedish krona.

It must be amazing to think you're doing everything right even though the whole world is literally screaming that you're doing it wrong.

I hope I'm wrong

The European Central Bank's (ECB) next interest rate announcement will come on Thursday. The market is divided into two almost exactly equal parts as to whether the ECB will leave interest rates unchanged or implement an increase.

The ECB's three most important parameters that form the basis of their reaction function are underlying inflation, inflation expectations in the medium term and that the monetary policy pursued is having a good effect.

Personally, I believe in an increase of 25 points mainly because of the ongoing inflation which is still far too high plus the monetary policy conducted has not had a good enough effect yet.

My wish, however, is for the ECB to leave the policy rate unchanged, which might make it easier for the Swedish central bank, Riksbanken, to do the same.

I was wrong

Riksbanken, Sweden's central bank, raised the policy rate with only 25 points. Despite the increase in the key interest rate, the Swedish krona continues to lose value against both EUR and USD.

The outcome of the exchange rate loss of the Swedish krona against EUR and USD is inflation in itself.

The only tool Riksbanken has available is a policy interest increase, which obviously does not have the desired effect. Maybe you should appoint younger people with new thinking to deal with the problem, not replace the outgoing head of the Swedish central bank with a slightly younger copy.

"The definition of insanity is doing the same thing over and over and expecting different results."