Swedish Riksbank cuts interest rates again to -0.35pc to stop krona strengthening

 
Clara Guibourg
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The Riksbank's Stefan Ingves cut Sweden's interest rates again.

Sweden has cut its interest rates again, from -0.25 per cent to -0.35 per cent.

The Riksbank acted to weaken the Swedish krona, citing worries about the situation in Greece as well as economic uncertainty as explanations.

The Eurozone economy is strengthening, but the past days’ events in Greece have created a good deal of uncertainty. Consequences for the Eurozone, and for Sweden, are difficult to estimate.

Sweden’s central bank is working to stop deflation taking hold in the country, working towards a two per cent inflation rate. Its latest move comes as a response to concerns that an unexpectedly strong krona will hamper inflation.

The situation in Greece was the focus of the press conference on Thursday, as Stefan Ingves, head of the Riksbank, commented that the Greek economy is small, and that Sweden’s trade with Greece is small.

“Nevertheless, the situation increases uncertainty about recovery in the Eurozone,” he said.

The Riksbank said in a statement that interest rates are expected to hold at -0.35 per cent for more than a year, and the bank doesn’t rule out further cuts to come.

The rate cut took both markets and analysts by surprise. Reactions from analysts suggest the signal a rate cut sends might be more important than its size.

"The central bank has come in for criticism for hiking rates too early in the past and this appears to be a concerted effort to avoid making that mistake again," Thomas Laskey, fixed-income fund manager at Aberdeen Asset Management, commented to the FT.

Following the surprise cut, the euro rose one per cent to 9.348 SEK.

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