The third interest rate cut by the Swedish central bank is expected today. The markets do not even doubt that interest rates will be reduced by at least 0.25 percent. point, but does not rule out the possibility that the Riksbank may take a twice as large change. Inflation is falling faster than the central bank expected, and inflation expectations have also moderated significantly.
This year, Swedish interest rates have already been cut twice by 0.25 percent each. point, and the central bank indicated that it is ready to reduce interest rates 2-3 times by the end of the year. Sweden's central bank started cutting interest rates earlier than the ECB and the Fed, and the Riksbank is expected to remain more aggressive than other major central banks.
US stocks continue to slowly move to new highs. The S&P 500 rose another 0.3 percent yesterday. and set a record again. Stocks rose despite a surprise drop in U.S. consumer confidence. The Conference Board's consumer confidence index fell by the most in 3 years, falling nearly 7 points to 98.7. Consumers have become more pessimistic about the economy, fueled by fears of a worsening job market situation. However, it is important to mention that currently the labor market is still quite strong, although the unemployment rate rose significantly during the year, 4.2 percent. are still at historically low levels and layoffs are rare. On the other hand, the proportion of households planning to buy a new home in the next 6 months increased, helped by falling interest rates. The news added to rising market expectations for another 0.5 percent. point rate cut in November.
Further stimulus from China is heating up equity markets. The country's authorities are trying to convince that this time the encouraging actions will not be in vain. The full arsenal of monetary stimulus is being deployed to that end, with another major interest rate cut announced today. China's stock indexes rose about 6 percent in the last two trading sessions. Still, monetary stimulus has limits, and some China analysts miss a larger shift in fiscal policy. Consumption and consumer confidence are at low levels, and monetary measures alone may not be enough to get the domestic economy moving again.