Swedish central bank keeps key interest rate in negative

The Swedish central bank (Riksbank) has decided to leave the repo rate unchanged at minus 0.25 percent, Riksbank announced in a press release on Thursday.

Repo rate is the rate at which commercial banks borrow money from the central bank.

Riksbank explained in a press release that after several years of strong performance and with the rate of inflation close to the target of 2 percent, the Swedish economy is slowing down.

Riksbank stated that inflation has slowed in recent months in line with forecasts, and overall, inflation prospects for the next year remain unchanged. In line with the forecast from September, the Riksbank Executive Board has therefore decided to leave the repo rate unchanged at minus 0.25 percent.

Following the announcement, the Swedish krona strengthened against the dollar and the euro by three and five Swedish cents (ore), respectively. Shortly after the announcement, one U.S. dollar cost 9.61 Swedish krona and one euro cost 10.69 Swedish krona.

The decision on the repo rate will apply from Oct. 30, 2019.

Riksbank said that, as before, the interest rate is expected to be raised slightly towards the end of the year or at the beginning of next year, with current forecasts predicting that the repo rate will be raised to 0 percent in December.

However, low interest rates abroad and worsened sentiment mean that the forecast for the repo rate has been revised downwards, and the interest rate is now expected to remain unchanged for a prolonged period after the expected rise in December. Swedish public broadcaster SVT reported that the rate is not expected to rise again after December until 2022.