Stockholm: Sweden's central bank cut its main interest rate for the first time since 2009 and signalled it may keep the benchmark unchanged over the next year as Eur-ope's debt crisis saps growth in the largest Nordic economy.
The seven-day repo rate was lowered a quarter point to 1.75 per cent, the Stockholm-based Riksbank said yesterday. The move was predicted by 11 of 24 analysts in a Bloomberg survey, while two forecast a half point cut and the rest an unchanged rate. The bank lowered its rate forecast to 1.7 per cent in the fourth quarter next year, on average, from a 2.3 per cent estimate.
"They basically signalled no more rate cuts," said Michael Grahn, an analyst at Danske Bank in Stockholm. This disappointed the market, which had "expected that they would be a bit more aggressive," he said.
Sweden's bank returned to crisis mode as growth in the export-reliant economy, home to wireless network maker Ericsson AB, slowed for a third quarter in the three months through September.
Crown rises
The European Central Bank and policymakers in neighbouring Norway both cut rates this month to ease the fallout from the deepening debt crisis, which has sent Swedish interbank rates to a three-year high.
The crown rose 0.3 per cent to 8.9832 per euro and 0.6 per cent to 6.8868 against the dollar as of 9:48am in Stockholm. Sweden's two-year note yield rose four basis points to 0.79 per cent.
"The weak development of the economy in the euro area is also having a damping effect on the Swedish economy, which is now slowing down following strong development so far this year," the policymakers said.
The bank cut its forecast for economic growth next year to 1.3 per cent from 1.5 per cent, and estimated 2012 inflation will slow to 1.5 per cent, on average. Growth will accelerate to 2.3 per cent in 2013, it forecast.
Euro countries yesterday bolstered their anti-crisis arsenal, channelling €150 billion to the International Monetary Fund as the ECB widened its support for sagging bond markets.
