News Column

Swedish Krona At 1-year Low Versus US Dollar After Riksbank's Rate Cut

July 3, 2014

STOCKHOLM (Alliance News) - The Swedish Krona tumbled against the US dollar in European morning deals on Thursday after Sweden's Central bank lowered the key repo rate by half a %age point to combat deflation.

The Executive Board of the Riksbank cut the repo rate by 0.5 %age points to 0.25% from 0.75%, effective July 9. The bank was forecast to slash the rate by 25 basis points.

The repo-rate path is revised downward substantially. Increases in the repo rate are not expected to begin until the end of 2015 and it is expected to be just over 2% at the end of 2017.

Policymakers assessed that the repo rate and the repo-rate path need to be even lower for inflation to rise towards the target. The low repo rate will contribute to higher demand in the economy as a whole, which will lead to inflation rising.

The Krona depreciated to 6.8759 against the dollar, its lowest since July 2013, and down by 2.6% from Wednesday's closing quote of 6.7045. The next possible downside target for the krona lies around the 6.90 level.

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Source: Alliance News

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