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Riksbank halves interest rates

TT/The Local · 2 Jul 2009, 09:57

Published: 02 Jul 2009 09:57 GMT+02:00

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In deciding to lower the rate once again, the Riksbank cited “very weak” economic activity abroad that has “hit Sweden hard”.

“Exports have fallen substantially and the situation on the labour market is continuing to deteriorate rapidly,” the bank said in a statement explaining the rate cut.

The Riksbank added that the economic downturn of 2009 has been “somewhat deeper” than what the bank had forecast back in April.

The bank’s decision to opt for further monetary policy expansion caught analysts unawares, with many believing that Sweden’s interest rate would remain unchanged.

“It’s surprising that the Riksbank did it again, especially when you considering the somewhat better figures that have come in,” said Henrik Mitelman, chief analyst with the SEB bank, to the TT news agency.

“The message to households and companies is that they can count on rates remaining more or less at zero for at least a year.”

While the Riksbank acknowledged there were signs of economic improvement, it argued that a lower interest rate, combined with Sweden’s current fiscal policy, would accelerate the nascent recovery.

Story continues below…

The bank forecast positive GDP growth by 2010, but expected Sweden’s labour market to lag, with employment not likely to grow until 2011.

TT/The Local (news@thelocal.se)

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Your comments about this article

10:36 July 2, 2009 by Localer
does it means Swedish krona rate will fall again ?
13:30 July 2, 2009 by Somebody17
I really hope the crisis will go soon, otherwise we all will suffer. And the employment forecast is not good also :(.

The bad thing is that Sweden relies very much on exports(especially cars unfortunately) and is also a small country.

I hope everything will go good globally otherwise who knows what can happen...
16:17 July 2, 2009 by Angst
10:36 July 2, 2009 by Localer

does it means Swedish krona rate will fall again ?

Yes, that's one of the advantages of Sweden having its own currency, it helps exports.
20:07 July 2, 2009 by Thebinary1
Its a game of "how low can you go!"

Sweden versus Eurozone.

Yes - its very interesting to see how Reinfeldt navigates these waters. His policies from now will most definitely put him in one of the following two shoes:

1. Either he is a traitor to Sweden by promoting other European Industries over Swedish ones

2. Or he is a traitor to the EU by promoting Swedish Industries over EU ones.

So far, it looks like he is a traitor to Sweden by refusing emergency loans to Volvo and Saab - which the EU approved in contravention to his government's conduct.

By the way here is irony for the Swedes - the more recent polls show they favour joining the Euro, when infact their weak SEK is what is currently keeping the economy in a much better shape compared to Sweden's other European counterparts like the UK, France, Germany, Denmark, etc....

Had Sweden already be on the Euro as of right now, things would not be as rosy as you see them now.
23:48 July 2, 2009 by justanotherexpat
Excellent - cheaper mortgage! Thanks Reinfeldt - didn't vote for you but hey, if it goes belly-up, at least my savings and assets won't depreciate if we bugger off back to Blighty!
10:35 July 3, 2009 by karex
Whoah... just because the Central Bank lowered the prime rate doesn't necessarily mean that the other banks will follow suit, at least not in the same extent. In know of at least one mortgage lender who did decrease, but not at the same level (around 0.15 instead of 0.20). Also, technically soeaking, even though we consider them assests, our homes are actually liabilities, even more so those which haven't been paid off and depend on mortgage payments. Even the ones that have no mortgages are liabilities: we must continue spending in order to keep them from depreciating...
14:17 July 3, 2009 by Luke35711
This is a bit worrying. Obviously, they know things which we don't, and they are afraid of further economic trouble. A mixture of Baltics and cars, perhaps?
20:25 July 3, 2009 by Donut
Great news!

Life has never been better for those with a job and mortgage. I would much rather see a sustained period of very low interest rates - the savings on the payments on my large mortgage more than offset any lost interest on my pathetically small savings...
07:45 July 7, 2009 by Angst
"Life has never been better for those with a job and mortgage."

Yes, Donut, but these artificially low interest rates are only a temporary crisis measure, implemented to try to keep catastrophic unemployment rates from getting even worse. And we do need people to save, which is where the country's future capital investment comes from.
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