By Johan Carlstrom
Dec. 3 (Bloomberg) -- Sweden’s central bank may lower the benchmark interest rate by one percentage point tomorrow in the biggest reduction since 1993 to rekindle economic growth and limit an increase in unemployment.
The world’s oldest central bank will probably cut the seven- day repo rate to 2.75 percent, according to 12 of 18 economists surveyed by Bloomberg. Three forecast a reduction to 3 percent and three to 3.25 percent. The bank will give its decision at 9:30 a.m. in Stockholm after bringing forward the date from Dec. 17.
“The sense of emergency introduced by the decision to move up the meeting suggests the delivered move will be large,” said Nicola Mai, an economist at JP Morgan Chase Bank in London, in a note. He expects a one-point cut “but it could be larger.”
The economy slid into recession in the third quarter as demand for exports weakened, the statistics agency said on Nov. 28. The same day, Riksbank Deputy Governor Lars Nyberg said the outlook had deteriorated, indicating the bank may cut rates in the next six months by more than the half-point predicted in October.
A one-point cut tomorrow would be the largest since the bank adopted an inflation target 15 years ago.
“We’re facing a really cold winter,” Finance Minister Anders Borg said last week. “It will be long, it will be cold, it will be bitter.”
The economy may contract by as much as 1.2 percent next year the government said last month. Unemployment will rise to 7.8 percent at most next year from 5.7 percent in October, it added.
Sweden’s largest builder, Skanska AB, said last week it will cut jobs, following similar announcements by drugmaker AstraZeneca Plc and Sandvik AB, the world’s largest maker of cutting tools.
The number of people who have been notified they will be fired reached the highest level in almost 16 years in October, the Public Employment Services said last month.
To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.
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