Swedish Riksbank Keeps Repo Rate at Negative 0.50%

February 14, 2018

Four months after lowering Sweden’s repo rate to an unprecedented level of zero percent in October 2014, Executive Board members embraced the negative interest rate tool, cutting the repo four times over the twelve months to February 2016 to its current level of -0.5% where such has been for the past two years. The start of a cycle of rate hikes is not expected to begin before the second half of this year. In fact, Board members at their latest review observed recently slower wage growth and lower-than-expected service price inflation. The released statement revises projected total and core inflation in 2018 downward by 0.3 and 0.2 percentage points to 1.7% and 1.8%, presents the hope that the Swedish krona doesn’t strengthen too rapidly, and asserts that “it is important not to raise the rate too early” simply because of the good outlook for Swedish growth. “It has taken a long time to bring inflation and inflation expectations back to 2 percent and uncertainty about inflationary developments means that monetary policy needs to be cautious.” Deputy Governor Ohlsson wasn’t convinced and cast a dissenting vote for a 25-basis point repo rate hike to -0.25%.

Copyright, Larry Greenberg. All rights reserved. No secondary distribution without express permission. 

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