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Sweden’s Experiment with Negative Rates
At the end of 2019, Sweden’s Riksbank initiated a policy change at a time when the much larger European Central Bank (ECB) announced its determination to persist with its negative interest rate policy. The Swedish central bank did something that no major central bank has done during the past six months: increase interest rates. However, this wasn’t merely a normal interest rate hike from one level to another above zero; the Riksbank raised rates from -25 basis points (bps) to zero, becoming the first central bank to exit negative interest rates (Figure 1). Under normal circumstances, it would have been ... (full story)