Riksbank keeps negative interest rates for Sweden

Sweden's central bank kept its main repo rate at -0.5% on Thursday despite signs of strong economic activity and inflation close to target.

The executive board of the Riksbank, instead decided that monetary policy needed to remain expansionary and kept to its forecast of not raising the rate until the middle of 2018.

Sweden has one of the lowest main policy rates in the world, and has faced criticism - particularly as it has benefitted from a competitive exchange rate, with the krona about 20% lower now, than its longer-term trend.

Economy

Economic developments since September were in line with the Riksbank forecasts, but inflationary pressures are subdued globally, the central bank said.

With inflation at 2.3% - just above its 2% target rate - the Riksbank appeared wary of raising its rates until the European Central Bank makes a move, for fear of the krona appreciating and causing inflation to fall back below target.

"The Riksbank's monetary policy has contributed to economic activity in Sweden being strong," the central bank said in a statement.

"The employment rate is historically high. Inflation has risen and was 2.3 per cent in September. Above all, prices for services have increased rapidly, which reflects the way in which the strong economic activity is having a greater impact on the rate of price increases."

Market reaction

The OMX Stockholm Benchmark Index edged 0.05% higher to 998.8 in late morning trade.

Meanwhile, the Swedish krona was flat against the dollar at SKr8.2213, and was also unchanged against the euro at SKr9.7105.