STOCKHOLM: Sweden's central bank cut its key interest rate to 3.75 per cent from 4.00 per cent on Wednesday as expected and said it expects to cut the rate two more times in the second half of the year if the outlook for inflation still holds.
"Inflation is approaching the target while economic activity is weak," the central bank said in a statement. "The Riksbank can therefore ease monetary policy."
The overwhelming majority of analysts in a Reuters poll had forecast a quarter point cut.
Rate-setters, however, are worried that rate cuts could further undermine the Swedish crown and add to inflationary pressures, especially if the Riksbank gets out of synch with the European Central Bank and the U.S. Federal Reserve.
The crown is currently trading at around the same level against the euro as during the global financial crisis in 2008-2009.
On the other hand, growth in large parts of the economy has ground to a halt and many households are struggling with mortgage payments at their highest level for more than 15 years.
Sweden's economy shrank 0.2 per cent in 2023 and remained weak during the first three months of the year.
The last time the policy rate was lowered was in early 2016 when it fell to -0.50 per cent, the lowest ever level. - Reuters