ETF Trends
ETF Trends

Sweden’s Central Bank is stepping in to ease the burden on the Swedish economy and related exchange traded funds (ETFs).

In what looks to be the country’s worst recession in more than half a century, Sweden’s Central Bank cut its benchmark interest rat to a record 0.5%, reports Johan Carlstrom for Bloomberg. The Swedish krona gained against the euro after the announcement.

It is estimated that the economy will shrink 4.5% this year and grow 1.3% next year. Deflation is expected to average 0.3%. Joblessness will climb to 8.9% this year and will continue to advance to 10.7% next year.

The government has promised $5.2 billion, or 1.5% of GDP, in spending on measures to boost job creation, which include tax cuts, infrastructure, schools and research. Further spending may go up to $7.27 billion in 2010.

Some economists think the Swedish Central Bank is being too cautious and should reduce interest rates further, write Joel Sherwood and Katie Martin for The Wall Street Journal. Some expect rates to reach 0.25% while the Swedish Bank SEB projects a 0.1% rate.

The Swedish Central Bank may resort to unconventional policies measures, like quantitative easing, as a last-ditch effort to protect the economy if interest rate cuts do not deter deflationary pressures.

  • iShares MSCI Sweden Index (EWD): up 11.2% year-to-date

ETF EWD performance

  • CurrencyShares Swedish Krona Trust (FXS): down 6.4% year-to-date

ETF FXS performance

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.