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Sweden’s Central Bank Cuts Rates For First Time In Eight Years

Sweden's central bank has lowered interest rates for the first time since 2016.

The Riksbank cut its key interest rate to 3.75% from 4% and signalled that it is likely to reduce the rate two more times this year if inflation continues to weaken.

After two years of rate hikes, central banks around the world are weighing when to start easing monetary policy.

Sweden becomes the second major economy to lower interest rates after the Swiss National Bank lowered its benchmark rate earlier this year.

The Riksbank said it felt comfortable lowering interest rates after economic data showed that inflation is trending down to an annualized 2% after peaking at more than 10% in 2022.

Most economists polled by the Reuters news agency had forecast a quarter percentage point rate cut in May.

After eight consecutive interest rate hikes, Sweden's economy has slowed and households are struggling with mortgage payments that are at their highest level in 15 years.

Sweden's economy contracted by 0.2% in 2023 and remained weak during this year’s first quarter.

The last time interest rates were lowered in Sweden was in early 2016 when the central bank’s key lending rate was reduced to -0.50%, its lowest level ever.

Central bank officials said that, going forward, they need to be vigilant to guard against a decline in the Swedish currency and to ensure that inflation doesn’t return.