The Swedish crown has hit a six-year low against the dollar after the central bank in Stockholm surprised many investors by launching a stimulus programme and cutting interest rates. Sonia Legg reports.
It's not often Sweden shocks markets but the central bank's decision to introduce negative interest rates wasn't expected. Neither was the launch of a bond buying programme. The moves are a response to falling prices and the risk of a deflationary spiral, says Sweden's Central Bank Governor Stefan Ingves. (SOUNDBITE)(Swedish) CENTRAL BANK GOVERNOR STEFAN INGVES SAYING: "There is of course a kind of symbolism in this. It is not very negative - we've moved from zero to minus 0.1 - but it is an important event in so far that we're in a new situation where we haven't been before and you have to think about how it is handled." The Riksbank isn't the first to take bold monetary action. The U.S. Federal Reserve, the Bank of England and the European Central Bank have all launched QE programmes. And Denmark has an even lower interest rate - it cut to -0.75% in order to defend its currency peg to the euro. But there's one key difference, many of the other programmes were introduced to prop up weaker economies - Sweden's has been growing at a solid pace. NAB Markets strategist Nick Parsons says it's "tokenism." (SOUNDBITE) (English) NICK PARSONS, HEAD OF MARKETS STRATEGY, EUROPE, NAB, SAYING: "If you look at the activity indicators in Sweden, if you look at employment, if you look at GDP, if you look at retail sales, if you look at the housing market. If you were to look at all those without casting an eye on CPI you would really have to question why they have bothered to do it." But headline consumer prices fell or were flat on an annual basis every month but one last year. And they're not expected to rise much this year. With low oil prices yet to take full effect and plenty of global uncertainty there seems to be a trend. 17 countries have cut rates so far this year.