Sweden’s central bank hiked its benchmark repo rate by a quarter point to zero as expected on Thursday, defying a slowdown in the economy and global uncertainty to draw a line under five years with negative interest rates.
The hike from -0.25% means the Riksbank becomes the first central bank to inch its way back up to what was long considered the floor for interest rates. Rates are still negative in the euro zone, Japan, Denmark, Switzerland and Hungary.
“The Riksbank assesses that conditions are good for inflation to remain close to the target going forward,” the central bank said in a statement.The central bank as before said it expected the repo rate would remain unchanged through 2021.The Swedish crown was slightly stronger against the euro after the decision.
However, the Riksbank is worried that negative rates are damaging the economy in other ways, boosting asset prices and debt and increasing the risk for a financial crisis.
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