Sweden: Riksbank leaves repo rate unchanged in April
On 27 April, the Riksbank said it would continue purchasing government and mortgage bonds up to the end of September and would leave the repo rate unchanged at 0.00%. The Riksbank added it was prepared to continue using all of the tools at its disposal to support the economy and inflation going forward. These decisions were prompted by the ongoing pressure that the coronavirus pandemic and related social distancing measures are placing on the Swedish and global economy.
The Riksbank decided to leave the repo rate unchanged because “it was not deemed justified at this point in time to try to increase demand by lowering the repo rate when the downturn in the economy is due to imposed restrictions and people’s concerns about the spread of infection”. However, the Central Bank added, “this does not rule out the possibility of the interest rate being cut at a later date if this is deemed an effective measure to stimulate demand”.
This all comes after the Riksbank announced on 22 April that it was expanding its government bond purchasing program to include municipal and regional government bonds, in addition to national government bonds. On 16 March, the Riksbank first announced it would begin purchasing up to SEK 300 billion worth of government and mortgage bonds to help keep the cost of borrowing under control. The Riksbank also cut the lending rate for overnight loans to banks to 0.20 percentage points above the repo rate and promised banks unlimited short-term credit at an interest rate of 0.20 percentage points above the repo rate.
The outcome of the next monetary policy meeting will be announced on 1 July.