Financial News: Sweden Cuts Key Rate Aggressively To Support Economy

Sweden Cuts Key Rate Aggressively To Support Economy

11/07/2024 - 05:09:00 (RTTNews)

(RTTNews) - Sweden's central bank lowered its benchmark rate aggressively in order to support economic activity, and hinted at more rate cuts soon.

The Executive Board of Riksbank decided to slash the policy rate by 50 basis points to 2.75 percent. Markets had anticipated a quarter-point reduction.

To further support economic activity, the policy rate needs to be reduced somewhat faster than was assessed in September, the board observed.

"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 bank said.

The bank also decided to maintain the government bond portfolio of SEK 20 billion. The decision means that the ongoing sales of nominal government bonds are expected to be concluded at the end of 2025.

"Economic developments are difficult to assess at present, especially those abroad and not least following the US election," the bank said.

"There are risks linked to the geopolitical tensions, the economic policy abroad, the krona exchange rate and economic activity in Sweden that can affect the outlook for economic activity and inflation and lead to a different monetary policy stance," the bank added.

Capital Economics' economist Adrian Prettejohn said despite a pick-up in consumption over the past few months, and an expectation for strong growth next year, policymakers want to see more concrete evidence of a sustainable economic recovery before they stop cutting rates.

Data released earlier in the day showed that consumer price inflation held steady at 1.6 percent in October. But CPIF inflation rose to 1.5 percent from 1.1 percent in September.

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