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Sweden Cuts Lending Rate to Minus 0.1%
Sweden's central bank has lowered its benchmark lending rate from 0% to -0.1% to help stimulate the country's economy.
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Sweden's central bank has lowered its benchmark lending rate from 0% to -0.1% to help stimulate the country's economy.
The Riksbank also says it will begin buying Swedish government bonds and other debt at a rate of €60 billion per month. The so-called quantitative easing program is similar to the strategy used by the U.S. Federal Reserve in 2012-2014 to help stimulate the American economy.
The central bank says both moves are in response to the threat of deflation, the unsettling effect of Greece's economic woes and an outlook for continuing slow expansion of the global economy.
The negative lending rate will allow Sweden's commercial banks to take out short-term loans from the Riksbank and pay back less than they borrowed. The hope is that a negative interest rate will encourage the banks to borrow more, then lend more, thereby stimulating consumer spending and building a healthy rate of inflation. The policy also is expected to attract foreign investment.
Last year Sweden's consumer prices shrank 0.2%, threatening a period of deflation in which consumers delay spending in hopes of lower prices in the future. Sweden joins Denmark and Switzerland, whose central banks also offer negative interest rates.
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