Why less interest and what does it mean? – Business Week

Why less interest and what does it mean? – Business Week

With less the interest rate moves Riksbank into experimental territory. But analysts welcomed the news. What you can expect in the new interest rate landscape.

It had tisslats and paw the property minus the interest rate but Thursday’s statement from the Riksbank shocked yet most . Repo rate cut to -0.10 percent.

“This surprised the markets. It was much softer than expected. The whole panoply of measures impress: the repo rate cut, they reintroduce the corridor of fine-tuning operations, the interest rate path shows some probability of a further cut, government bond purchases and the possibility of a loan program for businesses. They pressed sharply, “said Knut Hallberg, macro analyst at Swedbank in a comment Direkt.

Danske Bank calls the decision” absolutely right ” because it shows that tolerance to low inflation is small. Danske Bank’s experts do not think -0.10 is the limit without interest rate can be lowered even more.

As for the Swedish economy as it recovers relatively well at the moment and credit channels. The new repo rate implies a more expansionary monetary policy and minus interest may be seen as a non-conventional tools, or even an experiment.

But the fact is that Denmark already has a negative rate and Switzerland have had it.

Experts believe that it has a limited effect on inflation, but may risk leading to increasing asset prices.

With a negative repo rate mortgage rates continue to be low and the krona will weaken. Banks will need some time to adjust their own interest rates. Especially since less the interest rate can mean a technical challenge.

The small investors are not likely to have to face negative interest on their accounts, although a Danish bank recently introduced it. This led to customer flight.

Handelsbanken, Nordea and SEB in the wake of the Riksbank’s statement asserted publicly that they will not introduce negative deposit rates to customers.

Many things are still unclear. One example is that even before the news could Tax Board investigate what happens to the tax on so-called Investment Savings Accounts (ISK).

For banks, the negative repo rate they will pay to deposit their excess liquidity with the Riksbank, just as in a negative deposit rate. They will then want to shovel money out of the market. It is hoped that the money should be used for investment and consumption.

The Riksbank said in connection with the announcement that they are ready to “do more quickly.” According to Knut Hallberg at Swedbank is there any market participants will have in mind going forward. He calls the move tactically cleverly.

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