STOCKHOLM (AFP) – Sweden’s central bank, the Riksbank, announced yesterday it was raising its main interest rate by 0.25 percentage points to zero per cent, after nearly five years of negative interest rates.
The Riksbank said in a statement that given that inflation was near its target of two percent, and was likely to stay that way, it had decided to raise the main interest rate, the “repo rate”, to zero per cent.
In early 2015 the Riksbank, which is the world’s oldest central bank, lowered its guiding interest rate to -0.10 per cent for the first time in history and it has remained in negative territory since. A number of central banks have adopted negative interest rates, which means in practice that commercial banks are charged for holding reserves at the central bank, in order to encourage lending to the real economy to boost sluggish economies and ward off the threat of dangerous deflation.
The Riksbank added that “the repo rate is expected to remain at zero per cent in the coming years” and that it would maintain an expansive monetary policy and continue purchasing government bonds.