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INTEREST RATE

Sweden’s record-low interest rate extended until mid 2018

Sweden's record-low interest rate of -0.50 percent has been extended until mid 2018, and will not change early next year as previously intended, the country's central bank has announced.

Published: 27 April 2017 09:45 CEST
Updated: 27 April 2017 12:30 CEST
Sweden's record-low interest rate extended until mid 2018
Swedish krona coins. Photo: Anders Wiklund/TT

Though economic activity in Sweden is increasingly strong, the Riksbank has judged that it will take longer than expected for inflation to stabilise at 2 percent, in part due to uncertainty over political and economic developments abroad. As such the repo rate is now not expected to be raised until later than previously forecast.

It is also still more likely that the rate will be cut than raised in the near future, the bank said.

“To support the upturn in inflation, monetary policy needs to be somewhat more expansionary. The considerable uncertainty over economic and political developments abroad is also important for the stance of monetary policy,” the Riksbank said in a statement.

“The Executive Board assesses that the repo rate needs to be held at the current low level for a quarter longer than was assumed in February. The first repo-rate increase is now expected to be made in the middle of 2018. The repo rate path also reflects the fact that there is still a greater probability of the rate being cut than of it it being raised in the near term.”

READ ALSO: Cashless Swedes sitting on old notes worth billions

The bank will also further extend its programme of purchasing government bonds by 15 billion kronor ($1.7 billion) into the second half of 2017, which will mean purchases amount to a total of 290 billion kronor ($32.9 billion) by the end of the year, excluding re-investments.

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MONEY

How to protect your Swedish savings when the stock market tumbles

Recent stock market developments have made consumers in Sweden worried about the savings they have invested in the market.

Published: 5 August 2024 14:44 CEST
How to protect your Swedish savings when the stock market tumbles

Stock market volatility can be unsettling, especially when it hits close to home.

On Monday, the Stockholm stock exchange mirrored global market turmoil, with the OMXS index dropping 4.8 percent in morning trading. By 11 am, there was a slight recovery, but the index remained 2.6 percent down.

READ MORE: Stockholm stock exchange opens in the red amid global market jitters

Big names in Swedish industry weren’t spared: Boliden, a major mining company, dropped 3 percent, defence giant Saab fell 1.5 percent, and engineering firm Sandvik declined by 2.6 percent. In the banking sector, SEB took a 2.4 percent hit, while Swedbank dropped 3.6 percent.

This turbulence in the Swedish market came after significant drops in Japan’s Nikkei 225 index, which experienced its most significant one-day fall since the 1987 Black Monday Crash, and similar declines in markets across South Korea, Frankfurt, London, and anticipated losses on Wall Street.

In these uncertain times, many Swedish consumers with money invested in the market wonder whether they should do something to safeguard their savings.

Avoid impulsive decisions, expert warns

Stock market volatility can raise concerns about the safety of your savings, but according to SEB household economist Américo Fernández, there’s no need to panic.

“Should they be worried? I mean, no. I would say that this is how the stock market works: there’s a lot of uncertainty and risk connected,” he told The Local. 

“When you have savings on the global stock exchanges, this will happen, especially when we’ve had at least six months of really, really good returns – maybe even too good. Then, this is a little bit expected.

“But of course, it’s always dramatic when we have such developments in the stock market in just one or two days.”

Slow and steady wins the (investment) race

For those wondering how to protect themselves against such crashes, Fernández emphasised a consistent and steady approach to investing.

“The most common thing, the best strategy for the broad masses, is to save on a monthly basis. And this is what many Swedes do; our surveys show that 9 out of 10 Swedes save on the stock market every month. This is precisely what you should do: invest in a mutual fund, which is quite common in Sweden,” he said.

“In circumstances such as these, you buy more at a lower price, instead of timing the stock market, which is almost impossible, continue your monthly investments through mutual funds. That’s a good way of diversifying your portfolio.”

READ ALSO: Will the krona’s decline stop Riksbank from cutting rates?

Ignore the alarmist headlines

The SEB household economist also advised against reacting hastily to alarming headlines.

“Another thing that households should be aware of is that when you see alarming headlines, you should sit and calmly ride the wave out.

“It’s understandable that a lot of people are affected by herd mentality when we have these negative headlines. Everyone, but especially households with tiny savings, acts and sells, and then they buy again when the headlines are positive, when the stock exchange is at high levels…

“That is the opposite of what you should do. Try to neglect these things and be cool in these circumstances, even though it seems bad and hurts your wallet. However, if it hurts your wallet too much, that might be a signal that you have too much money in the stock market (laughs), which can be common for younger investors. Although they have had it pretty good recently,” he noted.

This advice is not only applicable to Sweden but also relevant across Scandinavia, according to Fernández.

“I think it’s applicable. Across Scandinavia, all Nordic countries save a lot of money on the stock exchange, partially because the pension system isn’t fully funded by the government,” he said.

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