Sweden’s central bank, or Riksbank, was the first among developed economies to introduce negative interest rates during the crisis and will now be the first to hike those rates over the next two months.
The bank’s decision defies the prevailing trend in developed economies, which are returning to the monetary policy known as quantitative easing, whereby a central bank buys predetermined amounts of government bonds or other financial assets in order to inject liquidity directly into the economy.
The UK, Germany, and Italy are on the brink of recession, while Sweden posted -0.1% negative growth in the second quarter of 2019. Unlike Germany and the UK, however, the Swedish slowdown was accompanied by a significant surge in unemployment.
In December 2018, Riksbank raised its interest rate for the first time in seven years and the bank is determined to keep the economy on the same track despite deteriorating fundamentals, pointing to robust inflation close to its 2% target.