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Sweden's key interest rate drops to zero

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Sweden's key interest rate drops to zero
Photo: Shutterstock
10:40 CET+01:00
Sweden's Riksbank has announced that it is dropping its benchmark interest rate from 0.25 percent to zero, a record low for the country.
The Riksbank said on Tuesday that while the Swedish economy is "relatively strong" and economic activity is continuing to improve, inflation is currently too low. 
It said it was cutting Sweden's key interest rate - the repo - as part of efforts to boost inflation.
The record-low rate is set to stay at zero percent until inflation picks up again. It is unlikely it will be increased until the middle of 2016. 
The Riksbank explained that Sweden's economic activity was heading in a promising direction, driven by good growth in household consumption and housing investment.
It predicted the labour market would continue to strengthen and that there would be "a clear fall" in unemployment. 
"Despite the fact that both GDP and employment have increased at a relatively good rate over the last 12 months, inflation has continued to be lower than expected," the bank wrote in a statement.
"This, taken together with lower inflation and a weaker development of economic activity abroad, means that it is expected to take longer for inflation to reach 2 percent."
The Riksbank said the change would come into effect on October 29th.
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