Sweden's Riksbank cuts rates by 25 basis points

(Sharecast News) - Sweden's Riksbank cut its benchmark rate by 25 basis points on Tuesday to 3.5%, as widely expected. The central bank said in a statement: "Over the year, inflation has deviated less and less from the target of 2%. At the same time, various indicators, such as producer prices and company pricing plans, have continued to imply that inflationary pressures are compatible with the target. All of this reinforces the picture of inflation stabilising close to the target and indicates that the risk of inflation becoming too high again has declined significantly.

"Moreover, new information since the monetary policy report in June indicates that the growth outlook in Sweden and abroad is somewhat weaker than in the most recently published forecast.

"In light of this, the Executive Board assesses that the policy rate can be cut somewhat faster than was assessed in June."

If the inflation outlook remains the same, it said, the policy rate can be cut two or three more times this year. In June, it had guided to a maximum of two more cuts.

Adrian Prettejohn, Europe economist at Capital Economics, said: "Looking ahead, there is only a limited amount of significant economic data being released before the Riksbank's next meeting in just one month's time. So we think a further rate cut is essentially baked in, given the policymakers' guidance today.

"On top of that, we expect a rate cut at each of the remaining meetings this year, as survey data suggests that core goods and services inflation has further to fall. We also think policymakers will want to loosen policy to support a flagging economy."