The Riksbank will cut its key repo rate next month as inflation outlook remains weak, the National Institute of Economic Research said in a report on Wednesday.
The think tank forecast Sweden's consumer prices to fall 0.1 percent this year, before rising to 1.1 percent in 2015. In March, the institute projected a 0.1 percent rise for this year and 1.2 percent gain for 2015.
The low level of inflation is due partly to the weak economic climate in Sweden and abroad making it hard for firms to raise prices, it said. Inflation is therefore expected to remain low this year and then climb slowly to hit 2 percent in 2018.
"The weak outlook for inflation means that the Riksbank will cut its repo rate to 0.50 percent in July," the institute said.
The institute today lowered its growth outlook for 2014 to 2.2 percent from 2.6 percent and for next year to 3 percent from 3.2 percent. For 2016, it estimates 3.3 percent expansion.
Further, the unemployment rate is expected to rise marginally to 8.1 percent in 2014. But going forward, the rate is seen easing to 7.7 percent next year and to 7.3 percent in 2016. Employment is expected to increase by around 1 percent per year in 2014-2018.
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June 19, 2026 16:46 ET Major central banks continued to dominate the economic news flow this week too, led by the Federal Reserve, as they announced their latest policy decisions. The Federal Reserve policy session was in focus as it was the first to be led by the new chief Kevin Warsh. In Europe, central banks of the U.K. and Switzerland announced their rate decisions. In Asia, the Bank of Japan drew attention for its policy moves, while data out of China threw some light on the state of the economy.