Tuesday, October 28, 2014

Ambrose Evans-Pritchard — Riksbank cuts rates to zero and mulls currency war to fight deflation

Sweden’s Riksbank has torn up the rulebook of global central banking, cutting interest rates to zero even though the economy is in the grip of a credit boom.

The extraordinary step is intended to stave off deflation but it comes at a time when the Swedish economy is growing at almost 2pc and property prices are rising briskly. The bank has abandoned earlier efforts to curb asset bubbles by “leaning against the wind”.

The Riksbank cut the deposit rate to -0.75pc in what looks like a preparatory move to drive down the krona. Governor Stefan Ingves said the bank has a toolkit of extreme measures in reserve, including use of the exchange rate. The comment is the first hint that Sweden may follow Switzerland and the Czech Republic in imposing a currency floor through unlimited purchases of foreign bonds.
Telegraph
Riksbank cuts rates to zero and mulls currency war to fight deflation
Ambrose Evans-Pritchard

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