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Swedish krona at 3 year low after surprise rate cut

Sweden’s Central Bank has shocked the markets by cutting interest rates by far more than expected. It slashed its main rate by 50 basis points to 0.25 percent. The Riksbank took the decision to deal with fears of deflation. It’s failed to meet its inflation target for more than two years.

The Swedish krona weakened on news of the rate cut, leaving it at a three year low. There was a spike of 2 percent in the SEK against both the dollar and the euro. But Mads Koefoed thinks that’s a short term effect.

The bank had been reluctant to lower rates over concerns about record household debt. Unemployment is also stubbornly high at 8 percent. Saxo’s Mads Koefoed says because of these issues it will take some time for inflation to rise.

02:07 minutes
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