The second loose developed country! Riksbank cuts interest rates for first time in eight years

The second loose developed country! The Riksbank cuts interest rates for the first time in eight years Source: Wall Street Insights Zhao Ying Will the European Central Bank follow the Riksbank and beat the Fed to cut interest rates? The curtain of interest rate cuts by global central banks has begun. Switzerland fired the first shot of interest rate cuts in developed countries. The Swedish central bank followed closely.
On Wednesday, the Swedish central bank lowered its benchmark interest rate from 4.00% to 3.750%, in line with market expectations. It also said that if the inflation outlook remains unchanged, it is expected to cut interest rates twice more in the second half of the year.
It is worth mentioning that this is the first time the Swedish central bank has cut interest rates since 2016. It took action before the neighboring euro zone to provide support for the Swedish economy troubled by recession.
Sweden said in a statement: Inflation is approaching the 2% target and economic activity is weak. Therefore, the Swedish central bank can relax monetary policy.
The move makes the Swedish Riksbank the second developed country central bank to adopt easing policies after the Swiss National Bank. The contrast highlights the divergence of central bank policies after the Federal Reserve\’s interest rate cut plan was hampered by stubborn inflationary pressure and a resilient economy.
Previous analysis pointed out that the Riksbank\’s statement indicates that the European Central Bank may also be ahead of the Fed in terms of monetary policy and take early action to cut interest rates.
Philip Lane, chief economist of the European Central Bank, previously said in an interview with the media that as inflation in the service industry finally begins to ease, the reasons for cutting interest rates in June are growing stronger.
Inflation fell and the economy contracted for four consecutive quarters Since the epidemic, global tightening policies have had a greater tightening impact on the Swedish economy. The economy has contracted for four consecutive quarters.
As a large proportion of loan rates in Nordic countries are fixed in the short term, consumers have cut back on spending and housing construction has fallen sharply. Highly leveraged owners have struggled to refinance maturing debt.
Riksbank Governor Erik Thedeen and his colleagues have also said that borrowing costs may fall in May or June.
Their choice means that with inflation falling and the economy sluggish, the domestic situation takes precedence over any worries that ahead of larger peers it will cause the krone to depreciate again, pushing up import prices.
After the data was released, the euro rose 0.4% against the Swedish krona to 11.73.
UBS\’s previous report predicted that Sweden\’s CPIF inflation rate will continue to fall close to 2% by June, providing more confidence to the central bank. The inflation outlook has stabilized; Sweden will usher in the first interest rate cut of this round in May. But it will continue in June An interest rate cut is unlikely.
Capital Economics predicts that the Riksbank will cut interest rates four times this year. Each cut will be by 25 basis points.
Risk Warning and Disclaimer The market is risky. Invest with caution.
This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users.
Users should consider whether any opinions, views or conclusions in this article are appropriate to their particular circumstances.
Invest accordingly and do so at your own risk.