(Bloomberg) -- The Riksbank cut its benchmark interest rate for the first time in eight years, acting before the neighboring euro zone in a bid to offer respite to Sweden’s recession-stricken economy.

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The central bank in Stockholm lowered its policy rate by a quarter point to 3.75% and said it could be reduced twice more in the second half of the year.

Two-thirds of economists surveyed by Bloomberg had expected the move, while the rest reckoned the Riksbank would keep borrowing costs unchanged.

“Inflation is approaching the target while economic activity is weak,” officials said in a statement on Wednesday. “The Riksbank can therefore ease monetary policy.”

The move makes the Swedish central bank the second among advanced-world peers after the Swiss National Bank to embark on post-pandemic easing. That contrast highlights how approaches are differing after the US Federal Reserve’s plans to cut rates were derailed by stubborn inflation pressures and a thriving economy.

Riksbank Governor Erik Thedeen and his colleagues had flagged that a reduction in borrowing costs was likely either in May or in June.

Their choice signals that the domestic situation, with subsiding inflation and a sputtering economy, takes precedence over any concern that moving ahead of bigger peers will lead to another bout of krona weakening that in turn would fuel import prices.

The global tightening campaign since the pandemic abated had an outsized impact on the Swedish economy, because a high proportion of loans in the Nordic country have rates fixed on short terms.

Consumers have cut back spending, housing construction has plunged and highly leveraged property owners have struggled to refinance maturing debt.

After four consecutive quarters of contraction, hopes have now increased that the Swedish economy will begin a recovery later this year, helped by lower borrowing costs.

--With assistance from Anton Wilen, Joel Rinneby, Love Liman, Christopher Jungstedt and Zoe Schneeweiss.

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