The Central Bank of Sweden lowered its main key rate on Wednesday, a first in eight years, highlighting lower inflation.
The monetary institution, which has called for two further cuts by the end of the year, lowered its rate by a quarter of a percentage point to 3.75%.
Inflation is approaching the target (2%) while economic activity is weak, justifies the Riksbank.
This reduction in Swedish key rates was widely expected: inflation slowed significantly in March to 4.1% year-on-year, after a peak of 12.3% in December 2022.
Inflation corrected for the evolution of real estate loan rates (CPIF), the Riksbank’s benchmark indicator, is even 2.2%.
If the inflation outlook holds, the key rate should be cut twice more during the second half of the year, adds the Swedish central bank.
According to her, there remains uncertainty regarding the outlook for inflation, both the rise and the fall.
The strength of the American economy, geopolitical tensions and the exchange rate of the Swedish krona, a weak currency, could lead to a further acceleration in inflation.
The upcoming adjustment of monetary policy should therefore be characterized by prudence, with gradual reductions in the key rate, continues the central bank.
The main Swedish key rate has been, since September 2023, 4%, which was its highest level since 2008.
The last rate cut by the Swedish bank dates back to February 2016.