The latest cut made by world’s oldest central bank has resulted in its interest rates being slashed to the record low of 0%.
Sweden’s Riksbank hopes the move will increase lending as well as forcing up the cost of goods. Consumer prices in Sweden have dropped in seven out of the last nine months, with inflation running low for nearly three years.
Although the economy has experienced healthy growth, economists fear that deflation will take hold.
The bank had already cut rates three times this year, but the question of how to strike the right balance between falling prices and other economic developments caused internal tensions.
Riksbank does not anticipate raising rates again until the middle of 2016 when it is hoped inflation will be at the 2% target.
Swedish property prices have nearly tripled since 1995, while consumer debt has almost doubled to about 175% of disposable incomes.
Swedish household borrowing rose by 5.7% last month.
The bank said today that it’s now “even more urgent” to manage risks from high household debts.
