Sweden: Central bank ends negative key interest rate

Schweden Flagge

A few minutes ago the Swedish central bank “Riksbank” announced its latest decision on the key interest rate. It will be raised from -0.25% to 0.00%. For four years now, the key interest rate in Sweden has been in the negative range, for two years even at -0.50%. Then it went up to -0.25%, and now to 0.00%. As the central bankers are currently also officially announcing, this key rate (repo rate) is likely to remain at zero in the coming years. It is estimated that it could rise to 0.13% by the end of 2022. The following chart shows the development of the key interest rate in Sweden over the last ten years.

source: tradingeconomics.com

Inflation in Sweden is expected to be 1.8%, 1.8% and 2.1% over the next three years according to the Riksbank’s current estimates. According to the central bankers, inflation has now been close to the 2% inflation target since 2017. And the environment looks good that it can stay there for the time being. Similar to economies abroad, the Swedish economy is currently in a phase of slower growth, according to the Riksbank. However, after several years of high growth and strong developments on the labour market, the economy is slowing down. Overall, this means that the Swedish economy is moving from a stronger than normal cycle to a more normal situation. Inflation has been at almost 2 percent since the beginning of 2017. After an expected decline in the summer, it has risen again to just under 2 per cent.

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