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Sweden's central bank lowers key interest rates amidst fears of Swedish household debt rise
Tuesday, 18 December 2012
Swedish central bank, the Riksbank's Governor Stefan Ingves cut its repo rate by 0.25 percentage point to 1 percent, in an unexpected announcement that has taken all the pundits aback
There has been increase talk in the past weeks that the Swedish interest need reduction given that the economy has been sliding according to various economic indicators.
"The weak developments in the euro area are clearly affecting the Swedish economy, which is now slowing down. Household consumption is weak, unemployment is rising, and inflationary pressures are low," writes the Riksbank in a press release.
This was taken as a top consideration when the Executive Board of the Riksbank met and decided to cut the repo rate by 0.25 percentage points to 1.0 per cent. Given that household consumption is weak, unemployment is rising and inflation pressure is low, the Riksbank aim to "support the Swedish economy so that inflation rises towards the target of 2 per cent."
Tuesday's repo rate drop was expected by the vast majority of analysts and market participants, and thus make it stand that the decision means Governor Stefan Ingves has been forced to go against his concern that reduced interest rates may further aggravate the Swedish households already high debt.
According to the Riksbank, the repo rate is expected to remain around this low level for the coming year. This repo-rate path will contribute to CPIF inflation being close to 2 per cent from 2014 onwards and to resource utilisation normalising in the coming period.
The Riksbank stress that "the risks entailed in households' high level of indebtedness remain, but given the weaker economic activity and lower inflation, the Executive Board of the Riksbank assesses that it is appropriate to cut the repo rate."
by Scancomark.com Team
Advertisement
Sweden's central bank lowers key interest rates amidst fears of Swedish household debt rise
Tuesday, 18 December 2012Swedish central bank, the Riksbank's Governor Stefan Ingves cut its repo rate by 0.25 percentage point to 1 percent, in an unexpected announcement that has taken all the pundits aback
There has been increase talk in the past weeks that the Swedish interest need reduction given that the economy has been sliding according to various economic indicators.
"The weak developments in the euro area are clearly affecting the Swedish economy, which is now slowing down. Household consumption is weak, unemployment is rising, and inflationary pressures are low," writes the Riksbank in a press release.
This was taken as a top consideration when the Executive Board of the Riksbank met and decided to cut the repo rate by 0.25 percentage points to 1.0 per cent. Given that household consumption is weak, unemployment is rising and inflation pressure is low, the Riksbank aim to "support the Swedish economy so that inflation rises towards the target of 2 per cent."
Tuesday's repo rate drop was expected by the vast majority of analysts and market participants, and thus make it stand that the decision means Governor Stefan Ingves has been forced to go against his concern that reduced interest rates may further aggravate the Swedish households already high debt.
According to the Riksbank, the repo rate is expected to remain around this low level for the coming year. This repo-rate path will contribute to CPIF inflation being close to 2 per cent from 2014 onwards and to resource utilisation normalising in the coming period.
The Riksbank stress that "the risks entailed in households' high level of indebtedness remain, but given the weaker economic activity and lower inflation, the Executive Board of the Riksbank assesses that it is appropriate to cut the repo rate."
by Scancomark.com Team