Sweden's central bank has cut interest rates for the third time in five months, just hours after the US indicated that it will attack Iraq this week. The Riksbank cut its key repo rate by 25 basis points to 3.5pc, its Executive Board said in a statement this morning. The bank last cut rates by 25 basis points in November and December 2002. "Continued uncertainty associated with falling share prices and the risk of war in Iraq has had a negative effect on economic prospects since the previous Inflation Report," the Executive Board said. "The picture of a gradual recovery. but the upswing is now expected to be slower."
The move could be the first of a number of rate cuts over the coming months by other central banks in response to a war in Iraq. Analysts expect the US Federal Reserve to leave interest rates on hold at its meeting today, but say it is only holding saving its ammunition until it can assess the impact of a war on the economy and will probably lower borrowing costs within weeks. The European Central Bank cut its rates earlier this month, while the Bank of England lowered its rates last month. The Riksbank was first of the major central banks to raise interest rates last year, raising rates by 0.25pc in both March and April in anticipation of an economic recovery//www.fxcentre.com