Sweden’s central bank surprises with size of additional rate cut

Stockmarket-Stock-Market-FTSE-Performance-700x450.jpgThe central bank of Sweden has cut its interest rates again, taking them from -0.35 per cent to -0.5 per cent, further than expected.

Sweden’s Riksbank decided to move into a more negative interest rate environment in an attempt to boost inflation towards its 2 per cent target.

The central bank said: “The economy continues to strengthen but inflation is expected to be lower during 2016 than previously forecast. The period of low inflation will therefore be longer. This increases the risk of weakening confidence in the inflation target and of inflation not rising towards the target as expected.

“To provide support for inflation so that it rises and stabilises around 2 per cent in 2017, the executive board of the Riksbank has therefore decided to cut the repo rate by 0.15 per cent to -0.50 per cent. Purchases of government bonds will continue for the first six months of this year, in accordance with the plan adopted in October.”

The move from Riksbank follows the other unexpected move from the Bank of Japan to cut rates to -0.1 per cent at the end of January. The decision led Japanese 10-year government bonds yields to hit zero in the following days.