Sweden Says Enough Is Enough on Negative Rates
The Riksbank parts with its peers because of concerns about collateral damage and unintended consequences.
It’s small but decisive.
Photographer: Mikael Sjoberg/Bloomberg
Most economists and market participants don’t usually spend much time looking at Swedish monetary policy. Today should be different given the decision by the Riksbank — the country’s central bank and the world’s oldest — to part ways with its peers in advanced countries by raising interest rates because of worries about the collateral damage and unintended consequences of an ultra-low regime.
By raising its main repo rate 25 basis points, Sweden exited a negative rate paradigm that had been in place for five years. The action came after officials there publicly expressed concerns that persistent negative yields distort the behavior of households and companies adversely.