Sweden's Riskbank unexpectedly lowers its key policy rate to 0%

Sweden’s monetary authority, the Riksbank, on Tuesday cut its main policy rate by 25 basis points, taking it to 0% by surprise, in a bid to ensure that the rate of consumer price inflation will move towards its target of 2%.

The decision was taken despite its expectation that economic activity will continue to improve and the strength it sees in the economy.

Economists had forecast a 15 basis point reduction.

In parallel, the central bank also carried out a “significant downward revision to the repo-rate path,” adding that it needs to remain at this level until inflation clearly picks up.

The appropriate date to begin raising the repo rate is in the middle of 2016. The Riksbank said.

Commenting on the decision UniCredit Research economist Chiara Silvestre wrote, "We think the RB is done easing monetary policy. However, should inflation keep missing the RB’s forecasts and inflation expectations start drifting lower, further action would be needed. Given that the lower bound for the key policy rate has been reached, the RB’s next easing step may consist of trying to put downward pressure on the SEK exchange rate, starting with rhetoric . In this regard, the publication of the minutes (due on 11 November) will provide more details."