Sweden fights deflation with 0pc interest rate
THE COUNTRY that brought you noir TV detective shows such as Wallander and – with Denmark – The Bridge, yesterday delivered some bleak news for savers.
Riksbank, Sweden’s central bank, cut interest rates more than expected to zero to ward off a prolonged deflation risk, and said it would delay tightening policy until the middle of 2016.
Like the neighbouring Eurozone, Sweden is grappling with persistently low inflation and wants to avoid slipping into a deflationary spiral that would hit the economy as falling prices would encourage consumers to delay purchases.
Consumer prices in Sweden have dropped in seven of the past nine months and inflation has stayed below the Riksbank’s two per cent target for almost three years.
“We think that will be enough,” Riksbank governor Stefan Ingves told a press conference in Stockholm. “But if the world turns out completely differently, then we have the tool box to do other things.”
The central bank’s dovish message sent the Swedish krona to a four-year low against the dollar and the euro.