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Sweden cuts interest rate amid eurozone worries

The Local/dl · 20 Dec 2011, 09:40

Published: 20 Dec 2011 09:40 GMT+01:00

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The rate, known as the repo rate, now stands at 1.75 percent.

In announcing the decision, the Riksbank cited uncertainty in the eurozone, as well as the dampening effects the sluggish European economies are expected to have on growth prospects in Sweden.

While Swedish economic growth was “strong” in 2011, according to the bank, there are signs that the economy is slowing down.

"There has been a fall in orders to Swedish export companies and exports will be much weaker next year,” the bank said in a statement.

“Households and companies will postpone their consumption and investment as a result of the poorer outlook.”

Weaker demand is also expected to result in higher unemployment in 2012, according to the Riksbank.

With eurozone worries and lower demand keeping inflationary pressures at bay, the Riksbank elected to cut Sweden's interest rate by a quarter point.

In addition, the bank said it was lowering the repo-rate path, expecting rates to remain low throughout next year.

"Later on, when inflationary pressures increase, the repo rate will need to be raised gradually," the bank said, emphasizing, however that there was "considerably uncertainty" about future economic developments.

Story continues below…

"The public-finance problems in the euro area in particular may become more serious and have more negative effects on the Swedish economy. In this situation, the repo-rate path may need to be lower," the bank said.

"On the other hand, it is possible that confidence in the public finances of the euro countries will recover more quickly than expected."

The Local/dl (news@thelocal.se)

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Your comments about this article

12:01 December 20, 2011 by the fonz
"On the other hand, it is possible that confidence in the public finances of the euro countries will recover more quickly than expected."

Yeah - don't hold your breat tho'
13:24 December 20, 2011 by Coaxen
Dear The Local,

There is a hige difference between percentage points and percents. Please use them properly in an economics article.
15:21 December 20, 2011 by zircon
Borg: big mouse shadows.
15:47 December 20, 2011 by canuk
your assuming that people working at the local know anything about mathimatics, most are not even very skilled at google translate.
12:37 December 26, 2011 by shahislam
Wise Government heads take public criticisms as calls for improvement and dumb ones get scared! The rapidly approaching time -when "fairly balanced trade's UN or US policies" will come into effect replacing imbalanced free trades, the spontaneous revolutionary spirit among the Chinese and Indian young generations will be a real surprise for the current old minded dumb heads of those pieces of lands.

And it will happen mainly for two reasons: 1. Extra foreign exports' boom and earnings will be gone. 2. This is not an era of old style suppression. We the freedom provider and humanitarian Greater North-Americans will always be proved as the best.

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