pic: booli.com
The news from the Swedish Central Bank (riksbanken) today was expected, but was still good to know: the repo rate (styrräntan) will remain the same at -0.25 percent.
The central bank has kept the repo rate at extremely, abnormally low levels (like, below zero levels) in an effort to bring up inflation. The extremely, abnormally weak krona has been one result of this policy. In their statement today, the central bank wrote that there are signs of a slowdown after the past several years of a strong economy, which they’re calling returning to a “more normal” level. Inflation hasn’t been as high as they would have liked, they said, but, they don’t expect it to change much in the next year either. So, all in all, they’re not changing the repo rate.
What was good about the decision was that the board on the central bank was unanimous, and this is always good for financial markets. Keeping it at the same rate meant no surprises, nasty or otherwise, and this is always good for financial markets. Financial markets like stability. What was a bit of a surprise though, was that they said they might just raise the rate to zero percent in December, even though the economy is not at all expected to pick up.
The krona went a little bananas in response, but then didn’t close so much differently than it did yesterday.
The repo rate is that rate at which the central bank lends money to the country’s major banks. It also dramatically affects the interest rate that the banks pass on to regular loan-seekers. If the repo rent goes up, you can count on the interest rate on your loan going up. Suddenly higher interest rates can make people get scared and retrench, stores go out of business, people lose jobs, the economy dips or crashes, you get the picture. The repo rate is big news.