STOCKHOLM (AFP) – Sweden’s central bank made its biggest interest rate cut since 2014 on Thursday and signalled more reductions were forthcoming to kickstart the Nordic country’s economy.
The Riksbank lowered its policy rate by 0.5 percentage points – twice the usual size of a cut – to 2.75 per cent. It was the central bank’s fourth rate cut this year as consumer prices have cooled.
“The Riksbank has gradually eased monetary policy over the course of the year, as inflation has declined and economic activity has remained weak,” it said in a statement.
Swedish inflation fell to 1.6 per cent year-on-year in September, down from 1.9 per cent in July.
According to preliminary figures from Statistics Sweden, inflation remained at 1.6 per cent in October.
The inflation measure used by the Riksbank to guide monetary policy, CPIF – which is adjusted for interest rates – rose to 1.5 per cent year-on-year in October, according to Statistics Sweden, still below the central bank’s two-per-cent target.
At the same time, preliminary figures showed that Sweden’s GDP contracted by 0.1 per cent in the third quarter.
“If the outlook for inflation and economic activity remains unchanged, the policy rate may be cut again at the next monetary policy meeting in December and during the first half of 2025,” the central bank said, reiterating the position already communicated in September.
The Riksbank made its first rate cut in eight years in May.
It left it unchanged a month later, but has since communicated an accelerated easing of its monetary policy.
After a series of rate hikes aimed at reining in inflation, Sweden’s interest rate had been held at four per cent since September 2023, its highest level since 2008.
Thursday’s cut was widely anticipated by analysts.
“Clearly, the Riksbank continues to prioritise supporting the weak real economy,” Swedbank economists said in a comment.
In neighbouring Norway, the central bank kept its interest rate unchanged at 4.5 per cent, a 16-year high, and signalled that it would likely not cut it this year in efforts to bring inflation under control.
