Sweden moves to fight deflation

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Sweden moves to fight deflation

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Shock moves from Sweden’s central bank to battle falling prices.

It has unexpectedly cut its main interest rate below zero and launched a small stimulus programme of money printing – quantitative easing – to buy government bonds.

Concerned about deflation, the Swedish policymakers said they could take further steps at any time.

Unlike many other European countries, Sweden’s economy is growing at a solid pace but even with that expansion, inflation is still way under the central bank’s 2.0 percent target and some economists say the country risks going into a deflationary spiral.

Headline consumer prices fell or were flat for every month except one last year. In June they rose just 0.2 percent

In addition the effects of lower oil prices are yet to be fully felt.

Inflation in Sweden is expected to rise just 0.1 percent this year.

Elsewhere in the region, four cuts in the last month have taken Denmark’s main policy rate to -0.75 percent as it defends its currency peg to the euro.