Swedish Government Says Rate Cut Might Be Part of Virus Response

(Bloomberg) -- The Swedish government says the Riksbank might cut interest rates should the fallout from the coronavirus trigger a downturn in the Nordic region's biggest economy.

“There's always the possibility of the Riksbank using interest rates,” Sweden's financial markets minister Per Bolund said in an interview. “While it's up to the central bank to decide, we've seen it in the U.S with the Federal Reserve.”

On Tuesday the Fed made an emergency 50 basis point cut and the U.S. central bank says it's willing to act again if needed to protect the economy from the impact of the spreading coronavirus.

That easing in monetary policy is something Bolund is keenly aware of as the number of cases climbs to 101 in Sweden and more than 100,000 globally. “At least as far as I can see the coronavirus hasn't had any major effect on the U.S economy,” he said.

‘Room to act'

The government this week shaved 0.3 percentage points off its growth forecast for Sweden because of the effects of the virus, and earlier this week flagged it has “room to act if need be.”

While the Nordic nation is already supporting companies hit by disruptions through a program of wage subsidies, other forms of targeted support for the corporate sector remain off the agenda for now. “We don't see that the situation requires it,” Bolund said.

The minister did however admit that the government stands ready to resort to broader fiscal stimulus should it be needed.

“We are taking measures in the spring budget,” Bolund said. “For example an extra 5 billion kronor will be added to the country's regions and municipalities. “

To contact the reporter on this story: Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Charles Daly

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