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ECONOMY: Sweden's new bond-buying plan to stave off falling prices could trigger a round of money printing by its fellow non-eurozone neighbours to thwart untimely currency rises against the weakening euro, analysts told the AFP newswire.
The Scandinavian country has joined a growing group of countries to cut its key interest rate to negative — a historical first for the Nordic nation that shows how authorities globally are resorting to new methods to nudge up inflation and growth. Central banks across Europe are fighting to stop their economies from slipping into damaging deflationary cycles that could be difficult to reverse.
“What we've seen since the end of 2014 and the start of this year is a type of chicken race between central banks. Several of them have chosen to lower interest rates and expand their balance sheets,” bank SEB's chief economist Robert Bergquist told AFP.
“I can’t envision a worse timing when we have an economy with such low inflation, a depleted monetary policy, a big output gap in the economy”
The current situation in financial markets includes a significant number of unpredictable and unpleasant global trouble spots, yet stock markets are rising at a decent pace.
SEB sees continued recovery but also greater downside risks in its latest Nordic Outlook, stating that the Riksbank will cut key rate again in uncharted new political landscape.
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