Sweden’s central bank has taken its main policy rate deeper into negative, citing growing economic uncertainty and worries about Greece.

“Inflation is rising and economic activity in Sweden is continuing to strengthen. But uncertainty abroad has increased and it is difficult to assess the consequences of the situation in Greece”; the Riksbank said in a statement.

“In the euro area, economic activity is strengthening, but the events in Greece over the past few days have substantially increased the uncertainty. The consequences of the situation in Greece for the euro area as a whole and for Sweden are difficult to judge”.

Financial Times said that some economists are concerned about the effects of such low interest rates on the economy.  House prices and household debt have been increasing in Sweden. 

The Riksbank expects to post gross domestic product growth of 2.9 per cent this year.

The Riksbank added: Since the repo-rate decision in April, the krona has also become stronger than the Riksbank had forecast and the development of the exchange rate remains a risk to the upturn in inflation. In this uncertain environment, monetary policy needs to be even more expansionary to ensure that inflation continues to rise towards the target of 2 per cent. The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.10 percentage points to -0.35 per cent and to extend the purchases of government bonds by a further SEK 45 billion with effect from September and until the end of the year.

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