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Friday 24th of April 2009
April 22, 2009

Swedish central bank cuts interest rates by 0.5%


by Peter Charalambous
”Swedish

The Riksbank, the central bank of Sweden, has decided to cut repo rates by half to just 0.5 percent, and it is hoped that the reduction in the interest rate will soften the blow of unemployment.

The inflation target of 2 percent is still attainable and as a result, the low rates are expected to be kept for at least another two years.

The continued weakness of the global economy has meant that exports in Sweden have been hit substantially and will have an affect on the labour market crippling domestic and household consumption.

The central bank has said that GDP growth is expected to be positive, although it will remain low through to next year. The central bank is committed to doing all it can to stimulate the economy and has substantially cut rates from 1.75 percentage points back in December.

It is hoped that the rate reduction will counter the reduction in production, although the bank has indicated that a further cut may be necessary alongside a number of other measure if the economy continues to deteriorate.

As a result of the rapid rate cuts since December, inflation is being kept up by a weak Krona and low productivity. However monetary policy developments will depend on inflation as well and global developments.

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