Swedish policymakers on Wednesday gave differing views on how much a fresh recession in the euro zone would drag down their economy after new industry figures pointed to a pick up in factory activity last month.
The country's finance minister said that the economic outlook is showing signs of stabilising after recent actions in the euro zone and a deal for Greece on debt restructuring would prevent a further worsening.
"If we see continuous action now where Greece has to deliver on their (debt restructuring) negotiations, and if the ECB continues to support stability in the financial sector, I think we are seeing some signs that the revision downwards for forecasts has probably come to an end," Anders Borg said. However, the deputy governor of the central bank repeated her calls for further interest rate cuts to tackle a slowdown in economic growth.
Sweden cut interest rates by 25 basis points in December, the first cut since July 2009, responding to weak exports and rising unemployment in the face of the economic slowdown in the euro zone, the country's key trade partner.
An outspoken supporter of looser monetary policy on the Sveriges Riksbank six-member Monetary Policy Council, deputy governor at Karolina Ekholm had pushed for a 50 basis point cut in December. Financial markets broadly expect the bank to cut by another quarter point at its next meeting on Feb 15. Ekholm said the focus would remain on inflation.
The central bank said Ekholm was repeating views she gave at the last policy meeting. Sweden's economy is slowing more sharply than anticipated, central bank policymakers said at their December meeting, but minutes published in January showed the bank was in wait-and-see mode on further reductions. Recent economic indicators have been somewhat mixed.