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MNI POLICY: Riksbank Jansson: -0.5% Negative Rate No Problem ​


A return to negative rates around -0.5% would not be problematic for the Riksbank, but let others lead on deeper cuts, Dep Gov says.

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The Riksbank could push benchmark rates back to recent lows at -0.5% without any great problems if needed, but Sweden should not be a leader in taking the rate into deep negative territory, Deputy Governor Per Jansson said Monday.

Responding to a question from MNI on the effective lower bound, Jansson told an online event hosted by Danske Bank that the Riksbank's experience of below zero rates was positive and that cutting the rate back to -0.5% would not be unworkable.

Jansson said he accepted the domestic and global situation was different now to the last time Sweden had negative rates, but thought the differences were small enough that rates at -0.5% would not be "a very big problem".

But he argued against being a leader taking rates deeper into negative territory, although he accepted the Riksbank might have to follow others into "deep negative rates".

"I think people think about -3, -4,- 5 percent. That I think is an experiment that I would not like Sweden to do first at least. I would like to see how others doing that before," he added.

Asked if the Riksbank had evidence that negative rates would work better in a recovery, Jansson told MNI the central bank had not researched whether there was asymmetric effects in different stages of an economic cycle.

The idea has been floated by Bank of England Governor Andrew Bailey, but there appears to be a lack of research to support the view.