Sweden's Riksbank today decided to cut interest rates by 25 basis points to 3.75pc, marking the first cut on a day when the ECB and Bank of England also announce rates decisions. "Developments in the real economy remain weak," the central bank said. "Industrial activity has deteriorated both internationally and in Sweden." It is the second time in as many months that the Riksbank has cut rates, marking an about face for one of the few central banks to have actually raised rates this year – in April, it hiked its repo rate by 25 basis points to 4.25pc.
The Riksbank said weaker demand was having a subduing effect on international price pressure and the krona was expected to appreciate over the central bank's two-year forecasting horizon, adding, "Altogether this will have a dampening effect on price developments for imported products in Sweden." The Riksbank said a weaker level of industrial activity in several of Sweden's major trading partners suggested somewhat poorer prospects for the Swedish economy. "Exports have slackened, industrial production has been subdued and order intake is weak," it said. //www.fxcentre.com