STOCKHOLM: The Swedish central bank on Thursday sent its key repo interest rate into further negative territory as it said low inflation would linger longer than it had previously predicted.
The Riksbank cut its interest rate by 0.15 percentage points to an all-time low of minus 0.50 percent after it introduced a negative rate for the first time a year ago.
“The economy continues to strengthen but inflation is expected to be lower during 2016 than previously forecast,” the bank’s statement reads.
The bank’s revised forecast said the key interest rate would stay negative until 2018 and that price-level increases would not reach its target of 2 percent until 2017.
The price of goods in Sweden remained flat during 2015, with underlying inflation at 0.9 percent, according to Thursday’s figures.
The Riksbank said its policy of low interest rates had helped to strengthen Sweden’s economy and reduce unemployment but that the rise in inflation it had seen was “still not on a firm footing.”
A period of “low inflation” will increase “the risk of weakening confidence in the inflation target and of inflation not rising towards the target as expected,” according to the Riksbank statement.
It stressed that it was prepared “to make monetary policy even more expansionary” in order to boost inflation.
