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Financial News: Sweden Exits Negative Interest Rate

Sweden Exits Negative Interest Rate

12/19/2019 - 06:45:00 (RTTNews)

(RTTNews) - Sweden's central bank decided to raise its key interest rate from the negative zone as inflation remained near the target.

As widely expected, the Executive Board of Riksbank, on Thursday, lifted the repo rate to zero percent from -0.25 percent. The repo rate has been negative since the start of 2015.

The forecast for the repo rate was unchanged, and the repo rate was expected to remain at zero percent in the coming years, the bank said in a statement.

"Inflation has been close to the target of 2 percent since the start of 2017, and the Riksbank assesses that conditions are good for inflation to remain close to the target going forward," the bank said.

An interest rate of zero percent along with large holdings of government bonds, means that monetary policy will remain expansionary and thereby create the conditions for inflation to remain close to the target, the bank added.

However, David Oxley, an economist at Capital Economics, said the repo rate will be cut back to -0.25 percent, probably in mid-2020 and that the risks to the krona next year are rooted to the downside.

The updated Riksbank interest rate projection signals that this is very much a one-and-done move, James Smith and Petr Krpata, economists at ING said. The bottom line is that interest rates are unlikely to move again in either direction any time soon.

According to central bank, inflation will remain at 1.8 percent in 2020 and 2021 before rising to 2.1 percent in 2022. The economy is forecast to grow 1.2 percent next year, 1.7 percent in 2021 and 1.9 percent in 2022.

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