”In our view, the forecasts made by the Riksbank in December were too optimistic both in terms of growth and the labour market and too pessimistic regarding the inflation development. I don’t think the central bank had expected this kind of data when they made their forecasts in December,” he said.
The Swedish economy, which itself slipped into recession in the third quarter, is expected to contract further this year. In forecasts released alongside the massive rate cut early last month, the Riksbank predicted the Swedish economy would shrink 0.5 percent this year before recovering to 2.2 percent growth in the following year.
But many economists believe the bank’s growth outlook is too rosy, some even predicting a contraction of almost two percent this year, and while the central bank has not pencilled in any further rate cuts this year, further easing may be in store.