– This is very positive, a step in the right direction. It's good to see that inflation is coming down a bit faster than expected. But it doesn't change much in the short term, says Swedbank's chief economist Mattias Persson.
Swedbank's economists had previously expected the Riksbank to raise interest rates twice more this year, bringing the key interest rate to 4.25 percent by the end of the year.
These increases, totaling 50 basis points (0.50 percentage points), would mean that the cost of a three million Swedish kronor mortgage would increase by 1,250 kronor per month before interest deductions if mortgage rates follow the upward trend.
August's unexpectedly low inflation is not enough to eliminate this risk, according to Persson.
– I don't see it at the moment, he says. However, he adds that if the downward trend continues, a rate hike next week could be enough.
– We still have a historically weak krona, which is now at even lower levels than when we made our previous forecast. So I'm still concerned that the Riksbank may have to act. It's a bit early to say we've won the battle.
The krona, already near record lows against the euro and the dollar, weakened slightly after the data was released. One euro costs 11.94 kronor, just one öre away from an all-time low of 11.96. Against the dollar, the krone also lost a few öre and is now trading at 11.12.
Robert Boije, chief economist at SBAB, believes that today's inflation figures reduce the likelihood of two more interest rate hikes.
– I, like most others, believe that the Riksbank will raise the key rate next week. However, we at SBAB believe that it should be the last hike. Unless, of course, inflation picks up again in the fall; there are no guarantees for anything, he says.
Meanwhile, interest rate decisions are expected from both the European Central Bank (ECB) this afternoon and the US Federal Reserve (Fed) next week.
What they decide to do will affect the krona and, consequently, what the Riksbank needs to do with the key rate.
– As long as there is uncertainty about how much the European and American central banks will raise their key rates, this tends to shake the krona a bit. Then, when you know that the Fed and the ECB are done raising rates, it will favor a stable krona, says Boije.
What does this mean for Skellefteå families?
Norran says:
The drop in inflation and the lower prices for food and electricity are important. This really matters, especially for families who are already feeling the squeeze.
However, it's crucial to understand that the problem isn't completely fixed. For many people in Sweden who have big home loans, things are actually getting worse.
What's making it more expensive to live right now is the increasing interest rates.
If interest rates keep going up, mortgage rates will also increase, probably to around 5 percent. That means people who borrowed money for their homes will have to pay more each month. This will increasingly strain their finances over time.
