Riksbank took market participants by surprise with larger than expected rate cut. Market was expecting it would cut interest rates further into the negative from current -0.35% but not more than -0.45%. Now Riksbank did a bit more and pushed the rates to -0.5%. In addition to that Riksbank declared that it is ready to do more and analyzing other measures that repo rate cut.

What surprised markets more is Riksbank's interest rate projections, which is showing that interest rate could potentially drop below -2% by end 2017.

The problem Riksbank is facing is high growth and no inflation. Central bank is expecting economy to grow at an average pace of 35, throughout the forecasted period.

According to the latest forecast GDP growth is revised marginally, 3.5% for 2016, down 0.1%, 2.8% in 2017 and 2.5% in 2018. However it has axed inflation forecast sharply by 0.6% in 2016 to 0.7%. Nevertheless it is expecting inflation to edge up to 2.1% in 2017 and 2.95 in 2018.

Swedish krona has fallen sharply against major trading counterparts. Down 0.93% against Euro, trading at 9.53 per Euro and down 0.6% against Dollar, trading at 8.42.