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Sweden Slides Further Into NIRP: Cuts To -0.25%; Expands QE

Tyler Durden's picture




 

Ahead of The Fed's 'impatience' today, and amid a tumbling EUR, the oldest central bank in the world has decided it is time to go further into the illustrious ranks of NIRP/QE'ers:

  • *RIKSBANK CUTS KEY RATE TO -0.25%, TO BUY GOVT BONDS FOR SK30 BLN

So as opposed to Denmark's roundabout "bizarro QE", Sweden just jumps in and monetizes that debt direct by expanding their QE program and shifts from small NIRP to bigger NIRP. All this while suggesting the labor market is strengthening and inflation has bottomed out. The reaction - SEK is plunging and OMX surges.

 

 

  • *RIKSBANK CUTS KEY RATE, TO BUY GOVT BONDS FOR SK30 BLN
  • *RIKSBANK EXPANDS QE PROGRAM
  • *RIKSBANK BUYS GOVT. BONDS FOR SK30B
  • *RIKSBANK: SIGNS INFLATION HAS BOTTOMED OUT, ALTHOUGH STILL LOW
  • *RIKSBANK SAYS LABOR MKT IS STRENGTHENING GRADUALLY

Having already cut to -0.1% in Feb, Riksbank is at it again.

Here is the full Riksbank statement:

There are signs that inflation has bottomed out and is beginning to rise, but the recent appreciation of the krona risks breaking this trend. The Executive Board of the Riksbank has decided to make monetary policy even more expansionary by cutting the repo rate by 0.15 percentage points to ?0.25 per cent and buying government bonds for SEK 30 billion, to support the upturn in inflation. These measures and the readiness to do more at short notice underline that the Riksbank is safeguarding the role of the inflation target as a nominal anchor for price setting and wage formation.

 

Monetary policy has an effect

 

The Riksbank's expansionary monetary policy has had a positive effect on the Swedish economy. GDP growth is relatively good, the labour market is strengthening gradually and there are signs that inflation has bottomed out, although it is still low.

 

Large fluctuations on the foreign exchange market create risks for inflation

There is still considerable uncertainty over international economic developments and the effects of the oil price. In recent weeks, there have been substantial fluctuations on the fixed-income and foreign-exchange markets. The krona has strengthened substantially, mainly against the euro, which is partly linked to the European Central Bank beginning its large asset purchases. At the same time, the Federal Reserve is moving towards its first policy rate increase, which has meant that the dollar has strengthened. It is difficult to assess the continued path for the krona in this environment. If the krona continues to strengthen in the near term, this could break off the upturn in inflation that has begun, so that it fails to rise sufficiently quickly. Low inflation over an even longer period of time increases the risk that long-term inflation expectations will fall and that the role of inflation as nominal anchor in price-setting and wage formation will weaken.

 

Further measures to ensure the rise in inflation

 

The Executive Board of the Riksbank assesses that an even more expansionary monetary policy is needed to support the upturn in inflation and ensure that long-term inflation expectations are in line with the inflation target. The Board has therefore decided to cut the repo rate by 0.15 percentage points to ?0.25 per cent. Moreover, the Riksbank will buy nominal government bonds for the sum of SEK 30 billion, with maturities of up to 25 years. These purchases, which will begin on 26 March and are expected to be completed at the beginning of May 2015, are an extension of the purchases made in February and March.

 

The repo rate is expected to remain at ?0.25 per cent at least until the second half of 2016. After that, it is expected to rise gradually and at a slower pace than was forecast in the February Monetary Policy Report. The repo-rate cut and the Riksbank's purchases of government bonds will lower interest rates in general and thus contribute to an increase in demand in the economy, and thereby in inflationary pressures.

 

Readiness to do more

 

The Riksbank is still ready to make monetary policy even more expansionary, even between the ordinary monetary policy meetings, if this is necessary to ensure that inflation rises towards the target. The repo rate could possibly be cut somewhat further and the Riksbank could buy even more government bonds. In addition, the Riksbank is prepared to launch a programme of loans to companies via the banks. In addition to these measures, there are a number of other measures that the Riksbank could take. These include the possibility of interventions on the foreign exchange or buying other types of assets.
Press conference today at 3 pm

 

A press conference with Governor Stefan Ingves and Ms Christina Nyman, Deputy Head of the Monetary Policy Department, will be held today at 3 p.m. in the Riksbank. Press cards must be shown. The press conference will be broadcast live on the Riksbank's website where it will also be available to view afterwards.

The decision on the repo rate will apply from 25 March onwards. The interest rates on the fine-tuning transactions in the Riksbank's operational framework for the implementation of monetary policy will remain at the repo rate +/- 0.10 percentage points. Further information on the Executive Board's deliberations in connection with the decision and on the Riksbank's purchases of government bonds can be found in a separate annex to the minutes on the Riksbank's website.

Here is the full list of the 24 central banks cutting so far in 2015, including the second rate cut by the Riksbank following its February rate cut:

1. Jan. 1 UZBEKISTAN

Uzbekistan's central bank cuts its refinancing rate to 9 percent from 10 percent.

2. Jan. 7/Feb. 4 ROMANIA

Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25 percent. Most analysts polled by Reuters had expected the latest cut.

3. Jan. 15 SWITZERLAND

The Swiss National Bank stuns markets by scrapping the franc's three-year-old exchange rate cap to the euro, leading to an unprecedented surge in the currency. This de facto tightening, however, is in part offset by a cut in the interest rate on certain sight deposit account balances by 0.5 percentage points to -0.75 percent.

4. Jan. 15 EGYPT

Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

5. Jan. 16 PERU

Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

6. Jan. 20 TURKEY

Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.

7. Jan. 21 CANADA

The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.

8. Jan. 22 EUROPEAN CENTRAL BANK

The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September next year, and perhaps beyond.

9. Jan. 24 PAKISTAN

Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices. Central Bank Governor Ashraf Wathra says the new rate will be in place for two months, until the next central bank meeting to discuss further policy.

10. Jan. 28 SINGAPORE

The Monetary Authority of Singapore unexpectedly eases policy, saying in an unscheduled policy statement that it will reduce the slope of its policy band for the Singapore dollar because the inflation outlook has "shifted significantly" since its last review in October 2014.

11. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2 percent. This follows three rate cuts last year, the most recent in November.

12. Jan. 30 RUSSIA
Russia's central bank unexpectedly cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount following the fall in global oil prices and Western sanctions over the Ukraine crisis.

13. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25 percent, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

14. Feb. 4/28 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation. On Feb. 28, the People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

15. Jan. 19/22/29/Feb. 5 DENMARK
The Danish central bank cuts interest rates a remarkable four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro.

16. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years

17. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease.
The rate was cut by 1 percentage point to 6.5 percent, the first adjustment since Oct. 2013, the central bank said in an e-mailed statement on Wednesday.

18. February 23, ISRAEL

The Bank of Israel reduced its interest rate by 0.15 percentage points, to 0.10 percent in order to stimulate a return of the inflation rate to within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability.

19. March 1, CHINA

China's Central Bank lowered by a quarter percentage point both the benchmark one-year loan rate, to 5.35%, and the one-year deposit rate, to 2.5%. "Deflationary risk and the property market slowdown are two main reasons for the rate cut this time."

20. Jan. 15, March 3, INDIA

The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75 percent and signals it could lower them further, amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s. Then on March 3, it followed through on its promise and indeed cut rates one more time, this time to 7.50%

21. March 4, POLAND

The Monetary Policy Council lowered its benchmark seven-day reference rate by 50 basis points to 1.5 percent, matching the prediction of 11 of 36 economists in a Bloomberg survey. Twenty-three analysts forecast a 25 basis-point reduction, while two predicted no change.

22. March 11, THAILAND

The Southeast Asian country -- a onetime export powerhouse that’s seen its manufacturing mojo dim somewhat in recent years amid historic flooding and political infighting -- lowered its main rate to 1.75 percent.

23. March 11, SOUTH KOREA

In a surprise move, the Bank of Korea cut its policy rate from 2.00% to a record low 1.75%.

24. Feb. 13, March 18: SWEDEN

Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds. Then on March 25, the Executive Board of the Riksbank has decided to make monetary policy even more expansionary by cutting the repo rate by 0.15 percentage points to ?0.25 per cent and buying government bonds for SEK 30 billion, to support the upturn in inflation.

 

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Wed, 03/18/2015 - 09:03 | 5901576 iofera
iofera's picture

I want to take this opportunity on behalf of the entire Zero Hedge community to congratulate Benjamin Netanyahu on his impressive victory for the Likud party and wish him every success in his coming term as Israel's Prime Minister!

Wed, 03/18/2015 - 09:10 | 5901593 y3maxx
y3maxx's picture

How does Bibi convince other countries to fight Israeli's Wars?

Wed, 03/18/2015 - 09:52 | 5901777 Jethro
Jethro's picture

Probably something to do with the Jews being God's chosen people (says so in the old book they wrote---which they borrowed heavily from the Egyptians and Babylonians), and the Europeans blindly following the religion (thank the Catholic church for dumbing everybody down for 1500 years) established by a Jew 2000-something years ago.  Then the Europeans placing some sort of significance on a piece of desert due to (now historical) reasons that have nothing to do with their ethnicity, history, culture, language, DNA or philosophical ideals.  Thanks to the Enlightenment period, French and English (then subsequently American) learned men dabbled in the mysteries and eventually convincved themselves of a messianic agenda to re-establish Israel.  I mean, you gotta feel sorry for the Jews and give them back their homeland right?  You wouldn't be a good Christian if you didn't want that...right?  All of the Protestant churches parrot blind support of Israel.  Most people, being too obtuse to question why, just simply follow along.

Personally, I think the whole region is shit.  I wouldn't lose one second of sleep if the entire middle east managed to kill one another down to the last goat fucking true-believer of either flavor.

Wed, 03/18/2015 - 11:12 | 5902114 iofera
iofera's picture

Another anti-Semite exposed.

Wed, 03/18/2015 - 11:29 | 5902183 Jethro
Jethro's picture

You mistake being pro-American (a real one, not one of those jingoistic douchebags) for "anti-semite". Last time I checked, the US didn't strafe an Israeli naval vessel, or commit the most industrial espionage on Israel. Some "friend"...

Wed, 03/18/2015 - 22:30 | 5904756 damicol
damicol's picture

what the fucks an anti semite,

 What the fuck is a semite?

Sounds like a bacteria

 Moron

Wed, 03/18/2015 - 09:11 | 5901598 Dr. Engali
Dr. Engali's picture

Lol...... This should be interesting.

Wed, 03/18/2015 - 09:14 | 5901613 Tsar Pointless
Tsar Pointless's picture

Fun fact: Likud is the Israeli word for "fascist".

Wed, 03/18/2015 - 09:27 | 5901662 SoilMyselfRotten
SoilMyselfRotten's picture

If that wasn't sarc then no thanks, i'll offer my own congrats to whom deserves it

Wed, 03/18/2015 - 10:06 | 5901825 JBilyj
JBilyj's picture

It's actually union or consolidation...

Wed, 03/18/2015 - 09:24 | 5901650 damicol
damicol's picture

And we all hope that his assassination comes tomorrow.

Meanwhile  Sheldon Adleman,  , the one on the left holding the dog lead attached to Netatahus neck is grinning from ear to ear as congress gets down on its collective knees to pay homage to Sheldons dog by lining to  suck  on its shriveled cock with its  knickers gracefully hanging across its knees.

 

Wed, 03/18/2015 - 09:39 | 5901709 FreeShitter
FreeShitter's picture

Fuck bibi

Wed, 03/18/2015 - 09:08 | 5901587 papaswamp
papaswamp's picture

Mirror mirror ....Who can be the NIRPiest of them all?

Wed, 03/18/2015 - 09:46 | 5901749 bania
bania's picture

RISKBANK!

Wed, 03/18/2015 - 09:08 | 5901588 Dr. Engali
Dr. Engali's picture

The fact that the Federal Reserve is even talking about raising rates is a fucking joke. The market has already tightened for them through the strong dollar rally. Go ahead and raise rates, I dare you.

Wed, 03/18/2015 - 09:09 | 5901592 papaswamp
papaswamp's picture

Looks like more and more countries are telling the Fed to fuck off.

Wed, 03/18/2015 - 09:14 | 5901612 Save_America1st
Save_America1st's picture

The currency war is only just heating up.

 

Wed, 03/18/2015 - 09:10 | 5901596 Philo Beddoe
Philo Beddoe's picture

Bullshit, Doc. They have to raise rates to stop the economy from overheating. 

Wed, 03/18/2015 - 09:13 | 5901605 Dr. Engali
Dr. Engali's picture

True, we don't want the proles demanding more fiat. We want them to feel lucky for what they have.

Wed, 03/18/2015 - 09:19 | 5901634 Philo Beddoe
Philo Beddoe's picture

Exactly. A .25 percent increase and you can call me a fucking saver again. Earning some sweet ass interest so I can deploy my capital in the future, 

Wed, 03/18/2015 - 10:51 | 5902026 lunaticfringe
lunaticfringe's picture

If they raise, it will only be a face saving gesture and it will ony be once. Remember boys, somebody has to refinance treasuries and since they/ve been refinanced into short term treasuries- someone has to pay the new interest.

We're just a big fucking Japan. Nothing else. Decades of this shit.

Wed, 03/18/2015 - 11:13 | 5902117 Bananamerican
Bananamerican's picture

or DecMonths....

Wed, 03/18/2015 - 09:11 | 5901601 Rathmullan
Rathmullan's picture

Short to intermediate term currency manipulation is a specialty of the central banks but their market prowess is impotent when it comes to the "rougue and wily" crude market. A $30 something handle on crude in the midst of a flood  of incremental (and the Fed will have to come up big today) liquidity may be the symbolic paradox that the jig is finely up. They need a war!

Wed, 03/18/2015 - 09:17 | 5901623 papaswamp
papaswamp's picture

The only oil option left to the US is to open up exporting...way open. Otherwise the buyers will stop buying due to lack of storage space causing a collapse.

Wed, 03/18/2015 - 09:12 | 5901607 wmbz
wmbz's picture

That should fix "it"!

Wed, 03/18/2015 - 09:17 | 5901624 Tsar Pointless
Tsar Pointless's picture

So much for the "Scandanavian model". It's been substituted by the "bankster-gangster model".

RIP Sweden. I wish I would have been able to visit that beautiful land before the implosion. If it's any consolation to me, I'm going to be able to say that about a lot of countries before all is said and done.

Wed, 03/18/2015 - 09:40 | 5901723 Börjesson
Börjesson's picture

Actually, Sweden has a long and glorious history of weakening its currency to boost its export industry, so this is nothing new at all. Our fair land may be imploding in other ways, but as for monetary policy, it's just business as usual.

Wed, 03/18/2015 - 11:47 | 5902268 25or6to4
25or6to4's picture

Börjessen
Now if you guys could only figure out how to boost exports for the recent flood of imports from the third world you would be in good shape. Interesting avatar by the way. Tre kronor, is that what's left in the Swedish treasury?

Wed, 03/18/2015 - 09:19 | 5901636 max2205
max2205's picture

Look for dow spy to gain 2% plus today

 

Wed, 03/18/2015 - 09:26 | 5901658 Soul Glow
Soul Glow's picture

bullish for saweedish equities because who wants to hold bond/cash.  Right Janet?

Wed, 03/18/2015 - 09:38 | 5901704 tommylicious
tommylicious's picture

Wasn't there a "Mr. Dirp" on South Park?

Wed, 03/18/2015 - 09:45 | 5901743 Bold Eagle
Bold Eagle's picture

How central bankers expect to boost inflation by imposing negative rates is beyond me.

Wed, 03/18/2015 - 09:53 | 5901780 Jethro
Jethro's picture

The Scandinavians were better off as Vikings.  It's difficult to admire a socialist with a NIRP banking policy. 

Wed, 03/18/2015 - 09:56 | 5901788 yrbmegr
yrbmegr's picture

I believe NIRP is going to have unintended consequences.  Can't say what they are, but I have a bad feeling.

Wed, 03/18/2015 - 11:13 | 5902118 ejmoosa
ejmoosa's picture

Hell, the intended consequeces are bad as well...

Wed, 03/18/2015 - 16:08 | 5903456 petkovplamen
petkovplamen's picture

No wonder they are screaming how scary and dangerous Russia is!

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