Sweden cuts borrowing costs more than expected to zero

In a surprise move, Sweden’s central bank has cut interest rates to zero.

The bank said that was to counter the risk of prolonged deflation and it does not plan to raise rates until at least the middle of 2016.

As in the eurozone, prices have been falling in Sweden encouraging consumers to delay purchases, which weakens economic growth.

The bank did say “the Swedish economy is relatively strong and economic activity is continuing to improve”.

It expects an expansion of 1.9 percent this year, against 1.7 percent previously, and 2.7 percent in 2015, versus a previous forecast of 3.0 percent.

It has cut rates steadily from a peak of 2.0 percent at the end of 2011 as the weak eurozone economy hit Sweden’s key export sector.

The central bank’s dovish message sent the Swedish crown to a four-year low against the dollar and to a four-month low against the euro.

with Reuters