Mish’s Global Economic Analysis
Saturday, July 4, 2009
There has been a lot of ludicrous recommendations recently to combat deflation by making deposit rates negative. I did not think any central bank would be dumb enough to try it. I thought wrong.
Today, Riksbank, Sweeden’s central bank cut the deposit rate to -0.25% effectively charging savers interest on deposited money.
The weak development of the economy requires a somewhat more expansionary monetary policy. The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.25 of a percentage point to 0.25 per cent.
Deep economic downturn
Economic activity abroad is very weak and this hits Sweden hard. Exports have fallen substantially and the situation on the labour market is continuing to deteriorate rapidly. The information received in recent months points to the economic downturn in 2009 being somewhat deeper than the Riksbank forecast in April.
This article was posted: Saturday, July 4, 2009 at 4:14 am