Swedish interest rates to fall to 3.0% by mid 2009

The decision by the Swedish Riksbank to cut interest rates to 3.75%, the second 50 basis points cut this month, clearly shows that the Bank’s full attention is now on preventing a major economic slowdown. Given that the bank had hiked rates as recently as September, this supports our view that even the most hawkish central banks in the developed world are likely to cut interest rates aggressively over the coming months.