Sweden’s Riksbank cut borrowing costs by a quarter point and raised the possibility of a bigger move in coming months in its bid to spur a listless economy.

The central bank reduced its interest rate to 3.25 per cent, and outlined additional easing that is likely to take the benchmark markedly lower by the end of 2024.

“The policy rate may also be cut at the two remaining monetary policy meetings this year” and “a cut of 0.5 percentage points is possible at one of these meetings,” the Riksbank said. “The policy rate is thus expected to be cut at a clearly faster pace than was previously communicated.”

The move was expected by all 23 economists in a Bloomberg survey, although several saw an outside chance of a bigger step – matching that of the US Federal Reserve last week – that officials have now aired as a possibility in future.

“The job on inflation has been completed – and then some,” said Kyle Chapman, a foreign exchange strategist at Ballinger Group, who predicts the Riksbank will need to become even more aggressive in its response. “I see strong risks that we get two 50 basis-point rate cuts before the end of the year.”

Governor Erik Thedeen and his colleagues have been emboldened by the slowdown in price growth since early last year that’s giving them leeway to help one of the laggard economies of the region. In recent months, the measure of inflation that the central bank aims to keep around 2 per cent has even fallen some way below that target.

Bloomberg