The US central bank Federal Reserve (Fed) lowers its key interest rate by 0.50 percentage points.
It is unexpectedly high and the first decrease since March 2020.
– Swedish The Riksbank has good reason to speed up the reductionssays Elisabet Kopelman, USA analyst and economist at SEB.
The US key interest rate is now at 4.75–5.0 percent after the Fed’s cut. Prior to the announcement, there had been much speculation about how large a reduction would be. Several observers thought that the Fed would be content with lowering the key rate by 0.25 percentage points, but now the central bank struck with a double reduction.
– It was expected that there would be a reduction, but we thought they would proceed a little more cautiously, says Elisabet Kopelman, US analyst and economist at SEB.
The Fed says it expects interest rates to be cut by another 0.50 percentage points this year. Meanwhile, the Fed sees four rate cuts next year and two more in 2026.
First reduction in four years
Wednesday’s reduction was the first in over four years. The Fed raised interest rates at a brisk pace in 2022-2023 to cushion the effects of the inflationary shock. The last increase before today’s reduction was made in July 2023. The interest rate was then at the highest level in over 20 years.
– 25 points here or there doesn’t make a huge difference, but the faster you lower, you move towards a certain level, says Elisabet Kopelman.
In a comment, the Fed writes that the bank has gained greater confidence that inflation is permanently moving towards the target of 2 percent, AP reports. After the interest rate announcement, the American stock markets lifted.
The Riksbank has good reasons to lower the interest rate
Elisabet Kopelman believes that the announcement represents a greater probability that the Swedish Riksbank will also make a double reduction of the key interest rate.
– There are good reasons to speed up the reductions, they are just above the target and, unlike the US, we have higher unemployment and a worse economy, says Kopelman
As early as next week, the Riksbank is expected to lower the policy rate further, and the current forecast is that the policy rate will be lowered by 25 basis points.