Sweden Cuts Rates Deeper into Negative Territory, Steps up Currency War

Sweden’s central bank cut its main interest rate deeper into negative territory on Thursday and said it was ready to do more to revive inflation, fuelling a currency war even as its economy booms and concerns over a credit bubble grow.

As policymakers battle to weaken their currencies against global rivals, the Riksbank chopped its repo rate to -0.50 percent from -0.35 percent.

It also effectively expanded its bond-buying scheme by saying it would reinvest money from maturing bonds and coupon payments from its asset portfolio.

It added that it was looking at other ways to ease policy – including currency intervention.

But many analysts say that with the economy growing robustly and fears of a credit bubble rising, the Riksbank is running out of ammunition to push up inflation. It may not be able to compete with possible further easing by the European Central Bank in March, they add.

Reuters

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.