STOCKHOLM (Reuters) -A monetary policy easing cycle in Sweden that has seen eight interest rate cuts since spring last year, including a quarter-point cut last week, is probably over, minutes of the Riksbank’s most recent monetary policy meeting showed on Monday.
The Riksbank cut its policy rate to 1.75% from 2.00% on September 23 arguing underlying inflation was heading toward the 2.0% target – and probably lower – leaving room for rate-setters to give a sluggish economy a final boost.
“Even though some risks remain, the arguments in favour of lowering the interest rate and thereby providing further stimulus to demand in the economy outweigh the counterarguments,” Riksbank Governor Erik Thedeen said.
“As I now judge the situation, this will probably be the last cut in this interest rate cycle.”
Sweden’s central bank has been weighing above-target headline against an economy that has stuttered since the start of the year.
With a final rate cut, the central bank hopes growth will now pick up, while inflation should continue on a downward path as temporary and technical factors wash out of the figures.
However, the situation remains finely balanced.
“One risk of today’s rate cut is that … a policy rate of 1.75 per cent is too low, given the growth potential in the Swedish economy,” Thedeen said.
“If demand were to become unexpectedly strong next year, and this were to threaten price stability, we will have to start rate rises earlier than we currently plan and have expressed in the policy rate path.”
The Riksbank publishes its next policy decision on November 5.
(Reporting by Simon Johnson, Niklas Pollard, Johan Ahlander and Anna Ringstrom in Stockholm, Terje Solsvik in Oslo; Editing by Niklas Pollard and Terje Solsvik)
