Sweden’s record-low interest rate continues

Sweden’s record-low interest rate of -0.50 percent will remain in place and it is more likely that it will be cut than raised in the short term, the country's central bank has announced.

Sweden's record-low interest rate continues
Risks could jeopardize the upturn in inflation, the Swedish central bank says. Photo: Pontus Lundahl/TT

The news was anticipated after the Riksbank previously said in October that its plan was to keep the negative interest rate in place until early 2018 due to a slower than expected rise in inflation. On Wednesday, it reiterated that plan remains unchanged, explaining that taking risks could jeopardize the upturn in inflation.

“Monetary policy needs to remain very expansionary for inflation to rise towards 2 percent,” the Riksbank wrote in a press release.

“But the low interest rate levels also entail risks such as increased household indebtedness. To achieve long-term sustainable development in the Swedish economy these risks need to be managed via targeted measures within housing policy, fiscal policy and macro prudential policy,” it added.

The bank also confirmed that it will extend its programme of purchasing government bonds into the first six months of 2017 by a total of 30 billion kronor ($3.2 billion). By that stage the Riksbank’s total government bonds purchases will have amounted to 275 billion kronor ($29 billion), excluding re-investments, which it plans to begin in early 2017.

The krona strengthened slightly against both the euro and the dollar after the announcement.