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Sweden Joins ‘Negative Interest Rates Club’

February 12, 2015 at 21:35 by Vladimir Vyun

Swedish coins and banknotesThe Swedish krona dropped against the US dollar today after the nation’s central bank joined some other central banks of Europe (including the European Central Bank and the Swiss National Bank) in implementing negative interest rates. The krona attempted to stay flat against the euro but fell as well recently.

The Riksbank announced today:

There are signs that underlying inflation has bottomed out, but the situation abroad is now more uncertain and this increases the risk that inflation will not rise sufficiently fast. The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.10 percentage points, to -0.10 per cent, and to adjust the repo-rate path down somewhat.

The central bank also announced its form of quantitative easing:

Moreover, the Riksbank will buy government bonds for the sum of SEK 10 billion.

The Riksbank mentioned growing risk to the global economic growth. Regarding the domestic economy, the Swedish central bank was more optimistic due to “the low oil prices, the weaker krona and the very low repo rate”, saying:

GDP growth is expected to increase at a faster pace in the coming period and the labour market is expected to strengthen.

All in all, the announcement was not massively negative, making it not as detrimental to the krone as it could be.

USD/SEK was up from 8.4219 to 8.4372 as of 21:33 GMT today. EUR/SEK gained from 9.6097 to 9.6163.

If you have any questions, comments or opinions regarding the Swedish Krona, feel free to post them using the commentary form below.

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