World’s Only Escapee From Subzero Policy Doesn’t Rule Out Return

Riksbank policy makers left the door open for the possibility to take interest rates below zero again to aid Sweden’s economic recovery.

More than a year after the Nordic country became the first to abandon negative rates, minutes of the central bank’s Feb. 9 meeting showed several officials sticking to the view that the policy remains a viable option to stimulate demand.

Cecilia Skingsley, the bank’s first deputy governor, said “a clear fall in inflation expectations” would be a “convincing factor for me to support” a rate cut. At the meeting, the Riksbank agreed to keep its benchmark rate at zero, as expected, and maintained its quantitative easing program.

While most economists don’t expect the world’s oldest central bank to return to negative rates, the comments show that the debate over one of the most controversial monetary-policy experiments in the 21st century is far from over.

Anna Breman, a Riksbank deputy governor, said sub-zero borrowing costs could help accelerate the recovery if vaccinations succeed in bringing down coronavirus infections.

“It’s still important to have a high level of preparedness to use all our tools if developments were to be worse than expected,” she said.

Overall, policy makers agreed that it was too soon to discuss withdrawing monetary support despite signs of economic stabilization and an uptick in inflation. Per Jansson, widely seen as the bank’s most dovish member, warned that reducing support now would be outright dangerous.

“It is important for the economic recovery and for our target attainment with regard to inflation that the monetary policy measures remain in place for quite some time to come,” Governor Stefan Ingves said.

©2021 Bloomberg L.P.

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