The Riksbank leaves key interest rate unchanged.
And the forecast for future interest rate hike postponed even longer than previously believed.
The new decision came 9:30 .
The Riksbank allows interest rates remain at historic levels, 0 percent.
The announcement was expected among the experts. In Aftonbladet survey conducted last replied 8 of 8 banks that they expected the repo rate unchanged.
Zero Interest Rate for 2 years
In contrast, the Riksbank reduced the forecast of how interest rates develop in the future, the so called path. This means that until the end of 2016 expect the interest rate slowly begins to rise towards the end of 2017 to reach 1.5 per cent (previously 1.75).
“The new interest rate path means that the repo rate remains at zero percent until CPIF inflation is close to 2 percent, “the Riksbank in its press release.
So we can look forward nearly two years with a key interest rate of 0 percent.
– This was very expected. One is left with interest levels and lowers forecast for interest rates. Basically you move forward uplift a quarter from the second to the third quarter of 2016, says Tor Borg, chief economist, SBAB.
Negative inflation
The Riksbank justifies the decision that inflation remains low, mainly as a result of falling oil prices, and needs to be stimulated by an aggressive monetary policy.
In the latest inflation report from Statistics Sweden, Statistics Sweden, the inflation rate was still negative in November, -0.2 percent.
CPI with a fixed interest rate, the Riksbank uses to see inflationary movements, was unchanged at 0.6 percent. This is far from the inflation target of 2 percent.
Historic decision
It was October 27th of the historic decision to cut interest rates by 0.25 percentage points to 0 percent. Never before has Sweden had 0 percent repo rate.
But the zero interest rate has not yet led to any boost in the Swedish economy.
How has zero interest rates had an impact on mortgage loans?
– It has benefited from the reduction, all banks have lowered their interest rates slightly. But even if you have a variable interest rate, it is bound in three months. Many have therefore not seen any change yet, says Christina Söderberg, savings economist at Compricer.
The Riksbank lowered interest rate forecast implies that the low interest rate will remain even longer than previously believed. It will affect mortgage lending further.
– We will see the bound, long-term loans reduced further. Thinking about tying their mortgage there’s no rush. I would think that you will have very low interest rate for a long time to come, says Christina Söderberg.
But some major changes in the mortgage market will probably not involved.
– I have hard to believe that the market will react anything. It’s already inprisat on the market a certain probability that one could reduce the interest rate to negative. They shall take effect on the market, they need to surprise more than that, says Tor Borg.
Other methods must
The Riksbank will flag because you are not going to cut rates even if monetary policy needs become more aggressive. Instead, preparations are other measures that can be used to make monetary policy more accommodative.
– only you can set the policy rate negatively. It has been in practice quite a bit of power. Not only can they can do – as they did in 2010 – to lend money to banks at zero interest rate in two years. It is the first one can imagine, says Tor Borg.
The next step is to start pumping money into the market.
– They can go ahead and buy securities in the market, stats – and mortgage bonds to push down longer-term interest rates as well. It’s basically the same thing as they push more money. What they do is they give the banks cash, says Tor Borg.
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