Shocking rate cut
At the moment Sweden, like many other Western countries, is having a hard time Maintain steady financial growth. Last week, the Swedish state bank gave a surprising statement, lowering the policy rate to zero percent. By doing so, hopes are that it will ignite the Swedish economy and turn up the inflation rate.
Update 2015-2017: In 2015 the state bank decided to implement Negative Interest Rate Policy (NIRP) and since then the main interest rate is set to a negative 0.5 per cent.
What is shocking about this decision is that Swedish households are already extremely indebted, by Lowering interest rates on loans, there are obvious risks that some households will assume further debts. The population's debt, is mainly due to the mortgages.
Critics now argue that the Swedish state bank is pouring gasoline on an already uncontrollable fire. By lowering interest rates, more people will be able to borrow ever greater amounts of money from the bank. According to critics, this may result in skyrocketing housing prices.
Other experts believe, however, that Sweden has no choice but to cut rates and that these measures are quite right based on the precarious situation that the country's economy now faces.