Investing.com -- The central bank of Sweden, the Riksbank, has decreased its key interest rate by a quarter percentage point, bringing it down to 2.50%.
This decision, announced on Thursday, aligns with expectations. However, after implementing five rate cuts this year, the bank has indicated a shift towards a more cautious stance as it moves into 2025.
The Swedish economy has been stagnant for the past two years, following a period when the Riksbank raised rates to combat escalating inflation. Inflation soared to approximately 10% towards the end of 2022. In May, the central bank began reducing rates once more, and inflation has since fallen below the 2% target.
Despite this, consumer and business spending remains restrained, and inflation has seen a slight uptick in recent months.
The Riksbank stated, "If the outlook for inflation and economic activity remains unchanged, the policy rate may be cut once again during the first half of 2025."
This follows a larger-than-usual half-percentage-point cut in November, when rate-setters forecasted a cut in December and the potential for one or two more reductions in the first half of 2025.
The bank further explained its cautious approach, stating on Thursday, "The interest rate has been reduced rapidly and monetary policy affects the economy with a lag. This argues for a more tentative approach when monetary policy is formulated going forward."
Following the announcement, the Swedish crown experienced a strengthening.
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