Sweden’s central bank is in a “wait-and-see mode” after cutting interest rates last month, Governor Stefan Ingves said in the minutes of the latest policy meeting.
The Nordic country isn’t in need of the same low interest rates as those countries or regions that are experiencing “major problems,” he said in the minutes of the December meeting published today. The board “will enter a sort of wait-and-see mode,” since it is “extremely difficult to assess the probability” of the bank’s main economic forecast, he said.
Sweden’s central bank last month cut its rate by a quarter-point to 1.75 percent, the first reduction since 2009, and signaled it may keep the benchmark unchanged over the next year as Europe’s debt crisis threatens to sap demand for its exports, which account for about half of economic output.
Ingves said in the minutes that he’s “well aware that new information can alter the preconditions governing future repo-rate decisions” at the meeting that saw two of the bank’s six board members calling for a rate cut of half a percentage point.
The Swedish krona rose 0.2 percent to 8.9059 per euro and 0.8 percent to 6.8455 against the dollar as of 10:59 a.m. in Stockholm. Sweden’s two-year note yield rose four basis points to 0.92 percent.
Ingves does “not give the impression of being committed to cutting rates again in February,” said Johan Javeus, chief strategist, at SEB AB in Stockholm, in a client note. “The economy needs to continue to weaken or the financial turmoil continue to increase” for another cut, he said.
Swedish economic growth slowed for a third quarter in the three months through September to 4.6 percent. Swedish data indicate the largest Nordic economy continued to slow in the fourth quarter with falling industrial orders as consumer confidence holds near a two-year low.
There has been “an abrupt slowdown in the trade in goods and in consumption” in Sweden, while “unemployment has stopped falling and the demand for labor is leveling off,” Ingves said. “There are clear signals that exports are slowing down and that GDP growth will be weak in the quarters ahead.”
A further slowdown will force the central bank to lower its main rate to 0.75 percent next year, the National Institute for Economic Research said the day after the Riksbank cut.