Sweden added to the turmoil in financial markets yesterday by cutting its main interest rate deeper into negative territory in an effort to boost the economy and stave off the threat of deflation.
The country’s central bank reduced its benchmark repo rate from -0.35 per cent to -0.5 per cent and said that it was ready to do more to revive inflation.
The reduction, which was larger than market expectations, raised fresh speculation about a tit-for-tat currency war as well as concerns about a domestic housing market bubble.
Stefan Ingves, the governor of the Riksbank, said that “unfortunately the world looks different to what it did in December. We have overall very expansive monetary policy globally. In such a world we cannot isolate ourselves from