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Sweden cuts interest rates again as it struggles with inflation in an unstable global economy of fallen oil prices. Riksbank, the country’s central bank, which was the latest one to introduce monetary stimulus, chose to cut the policy rate this week even lower into negative numbers.
Riksbank slashed the interest rates from minus 0.35pc to minus 0.5pc, thus surprising financial analysts who had predicted a 0.45pc. According to policymakers, this decision shows a reviving economy, but it also reflects a longer period of low inflation.
Seeing how they have adopted quite an expansionary monetary policy so far, this has managed to lower the unemployment rate and make the Swedish economy stronger. According to Riksbank officials, the country’s inflation is now expected to rise only 0.7pc by the end of 2017, contrary to the 1.pc predicted back in December.
Jessica Hinds, economist for Capital Economics, believes that Sweden’s central bank will probably need to take extensive measures in order to keep up with the global stimulus. Her assumptions are based on a number of surveys regarding business and consumer inflation expectations, which do not predict a very positive future in this regard.
Since the interest rates have been cut, the Swedish currency was forced to drop significantly, thus creating a positive impact on the national economy. All in all, the country is optimistic that all these measures will help increase inflation by approximately 2% in 2017.
According to the latest reports, the Swedish Crown is down by 0.94% against the dollar and 1.26% against the euro.
Sweden is not the only country going through significant economical changes during this time. The U.S. Federal Reserve is also pausing any further rate rises, after the institution made its last increase back in December, following a decade-long break.
The Bank of Japan also decided to cut interest rates down to a negative level, while ECB policymakers say that they might delve deeper into the negative terrain, as well.
Overall, Sweden is one of the EU countries with the lowest levels of national debt and one of the healthiest banking systems in the world. It overcame a deep financial crisis back in the 1990s, experiencing severe unemployment rates, uncontrolled spending and a growing national debt.
All that came to pass, however, with the help of some bold and ingenious government reforms, that transformed the Swedish economy and placed it in a top European position.
Image Source: FinancialTimes
