Chart of the week: Sweden's high cost of negative interest rates

Sweden's Riksbank, pioneered the use of negative interest rates after the financial crisis. But its drastic action has driven private debt in Sweden to extraordinary heights.

971_COTW

The Swedish central bank, the Riksbank, "pioneered" the use of negative interest rates after the financial crisis, charging banks for keeping excess reserves with it from as early as 2009. In early 2015, it cut its main policy rate, which eventually sunk as low as 0.5%. The bank's goal was to prevent the Swedish krona from becoming too strong, thus hurting growth. But its drastic action also fuelled a housing bubble, which has driven private debt in Sweden to extraordinary heights, as the chart shows. As a result, the bank is changing course rates are now at 0.25% and it hopes to raise them to 0% in December. "Investors should take note," says Nick Andrews of Gavekal. "The Swedish canary may be signalling a shift in attitudes to negative rates."

Viewpoint

Jupiter's John Chatfeild-Roberts, quoted in Citywire, on why the fund group sold out of Neil Woodford's fund by late 2017

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Explore More