Swedish central bank sees key interest rate at 0 for years

STOCKHOLM (AP) — Sweden’s central bank on Tuesday kept its main interest rate at zero and said it expects it to remain “at this level in the coming years” due to the economic uncertainty created by the virus pandemic.

Riksbanken said its policies and low interest rate had supported the Scandinavian country’s economy which “has now begun to recover after having fallen sharply in the spring. But the way back is long and fraught with uncertainty.”

The central bank said its monetary policy programs have had “a calming effect on financial markets and helped to keep interest rates to households and companies low in the crisis.”

It is continuing to buy financial assets and offering liquidity to support economic growth and nudge up inflation.

Neal Kilbane, senior economist at research group Oxford Economics, said the Swedish central bank’s tone “remains very cautious despite the strong initial recovery and we continue to expect the bank to keep rates unchanged until early 2024.”

“While the pace of the recovery has been slightly stronger than anticipated, the bank expects the impact of the crisis will be ‘prolonged’ and developments ‘fraught with risks of setbacks,'” Kilbane said.

Sweden is part of the European Union but does not use the euro, so it is not part of European Central Bank.

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