The First Central Bank in the World to Raise its Interest Rate to Zero

Riksbank, Sweden’s central bank which is also the oldest bank in the world brings always something new in the banking trend. In 2009 at the peak of the financial crisis, Riksbank was the first central bank in the world to cut interest rates to minus 1.25 percent. Seems that the experiment is coming to the end because the bank decided that in December 2019 will raise the interest rates from the negative territory (-0.25) to 0 percent according to financial times.

Before the 2008-2009 financial crisis, it was unimaginable a similar headline “The First Central Bank in the World to Raise its Interest Rate to Zero” but it turns out to be a reality today.

While the most recent report about the monetary policy claims that the implementation of the negative rates was a success for Sweden, it is strange why the decision to raise it from the negative territory.

The decision to end the experiment implies that it was not a good idea to tax the savings.

Moreover, according to the economist, the Riksbank is under fire for its perceived role in causing Sweden’s currency to weaken. In February the krona hit its lowest level ever in real trade-weighted terms, notes Henrik Unell of Nordea, Scandinavia’s largest bank. Nordea has dubbed the Riksbank the “krona-killing monster”.

Carl Bildt, ex Sweden prime minister said in a recent tweet:

Riksbank is one of the five central banks with negative rates and it seems that criticism and the devaluation of Sweden’s local currency against the euro forced the bank to end the negative rates experiment. However, in Germany the experiment continues on a larger scale. The Raiffeisen bank in Bavaria has imposed a -0.5 percent interest rate even to small saving accounts.

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