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June 22, 2005

Sweden Cuts Interest Rates

More reality-based monetary policy in Europe:

FT.com / Europe - Sweden cuts rates to 1.5% adding to ECB pressure: By Reuters: Sweden's central bank cut interest rates by a surprisingly large 50 basis points to a new historic low of 1.50 percent on Tuesday and some analysts said the door was open to further easing. The decision sent ripples through Swedish markets and beyond, into the euro zone government bond market, where traders said the Riksbank had turned the spotlight on Europe's economic woes and added to pressure on the European Central Bank to cut rates. Like the ECB, the Swedish central has been under pressure to cut rates to boost sluggish job market with inflation running low....

The bank, announcing its decision after a rate-setting meeting on Monday, said it was cutting its growth and inflation forecasts for this year, warranting a 50 point reduction. "The future direction for monetary policy will depend on new information on economic developments in Sweden and abroad and the effects this may have on inflation in Sweden. Monetary policy is now considered to be well-balanced," it said.

Posted by DeLong at June 22, 2005 03:42 PM