Sweden’s central bank cut its key interest rate by a bigger than expected 25 basis points to a record low zero percent on Tuesday to fight persistently low inflation.
Inflation has undershot the Riksbank’s target for years and despite signs the economy is picking up, consumer prices have only risen one month so far in 2014 on an annual basis.
“The Swedish economy is relatively strong and economic activity is continuing to improve. But inflation is too low,” the Riksbank said in a statement.
As well as cutting the repo rate to zero – below interest rates in the euro zone where growth is expected to be much weaker than in Sweden – the central bank pushed back its forecast for when it would begin tightening policy.
“It is assessed as appropriate to slowly begin raising the repo rate in the middle of 2016,” the central bank said.
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