Sweden's five-year experiment with negative interest rates

By 2014, Swedish inflation had slowed to around 0.5%, well under the Riksbank's 2% target, as the lingering euro-area debt crisis depressed demand among Sweden's trading partners and a strong krona held down import prices. Worried about the risk of a Japanese-style deflationary spiral taking hold, the Riksbank cut its repo rate below zero for the first time, to -0.10%, in February 2015, then deepened the cut to -0.50% in February 2016, a level it held for three years while also buying government bonds. The aim was less to punish savers than to push down the whole structure of market interest rates and keep the krona from appreciating in a way that would further suppress imported inflation. Inflation gradually moved back toward target over 2017 and 2018, and in December 2019 the Riksbank raised the repo rate back to zero, ending nearly five years of negative rates. The Riksbank's own later evaluation argued the policy had supported demand without the destabilizing side effects on bank lending or financial stability that some critics had predicted.