STOCKHOLM, Dec. 19 (Xinhua) -- Sweden's central bank, Riksbank, announced Thursday that the repo rate will be raised to zero percent following a period of almost five years of negative interest.
"Inflation has been close to the Riksbank's inflation target of 2 percent since the beginning of 2017 and the Riksbank estimates that there are good conditions for inflation to be close to the target in the future. Therefore, in line with the October assessment, the Executive Board has decided to raise the repo rate from -0.25 to zero percent," the bank said in a press release.
"The forecast for the repo rate is unchanged and the interest rate is expected to remain at zero percent over the next few years," the bank added.
Since spring 2015, Sweden has had a policy rate below zero percent. The new repo rate of zero percent will be applied from Jan. 8, 2020.
Joakim Bornold, savings economist at Soderberg & Partners, told Swedish Television (SVT) that the negative interest rate was a bit of an experiment that did not have as much effect as one had hoped for in the Swedish economy.
"We will now cease this experiment. It was a five-year experiment that didn't yield much," he said.
According to Bornold, the increase will not have much effect on private individuals. "It may hurt a little. Perhaps a little higher mortgage interest rate and a little stronger krona, but no major effects on the financial market."
There is no indication that this is the beginning of a continuing interest rate increase, added Bornold.
Christina Nyman, who is Chief Economist at Handelsbanken, is, however, critical that the current increase is happening so soon.
"I do not think it is the right time to raise interest rates. The economy is weakening, unemployment is rising, and I predict that inflation will fall below the Riksbank's target in the coming years," she said.
