SBAB forecasts interest rate cut

Swedish state-owned mortgage lender, SBAB, has given hope to hard-hit homeowners by forecasting an interest rate cut in December.

A swift decline in the rate of inflation will prompt the Swedish Riksbank to revise its plans for further base rate rises, forecasts SBAB in a new state of the market forecast.

“We are counting on the Riksbank cutting the base rate at its next meeting in December when the first indications of a lower rate of inflation begin to show,” said Tomas Pousette at SBAB in a press release.

SBAB believes that the Swedish economy will also benefit from financial policy and follow the US pattern with high growth returning already in 2009. GDP growth is forecast to amount to 1.9 percent in 2008 and 2.3 percent in 2009.

SBAB forecasts that the Riksbank will cut the base rate from 4.50 percent to 3.5 percent by next summer. This will lead to a rebound in house prices after a short dip.

By 2010 SBAB forecasts that Swedish GDP will climb to 3.2 percent. Consumer prices are expected to climb 3.7 percent in 2008, 2.2 percent in 2009 and 1.7 percent in 2010.

Open unemployment is forecast to be 6.0 percent in 2008 and 2009 and to climb to 6.2 percent in 2010.