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UK Interest Rates Remain Steady While Sweden Rises to Zero

The first meeting of the Bank of England’s Monetary Policy Committee following the election ended with no rate change. Members agreed to the rates being held until next year at least.

The Full Details
With economic growth flat and uncertainty over Brexit continuing, analysts were split over what they expected the MPC to do. Economic uncertainty and weak global conditions have led to slow growth and a greater demand for debt collection firms.
The Consumer Prices Index was also released shortly before their meeting. This showed a figure of 1.5%, which followed on from a flat October. It is 0.5% under the Bank of England’s target, which is 2%.

The 80-seat majority won by Boris Johnson was also a factor, as the decision-makers had to calculate how this will affect the economy. The tumble in the value of Sterling since the election was another factor to take into account, while wage growth has slowed down recently.

Eventually, they voted to hold the interest rate steady at 0.75%. This was decided in a vote of 7 to 2. The two members who disagreed with the decision were Jonathan Haskel and Michael Saunders. They wanted to see interest rates cut to 0.5%.
Overall, policy-makers at the Bank think that the economic outlook around the planet is more positive than it was a month ago. This is based on global growth looking brighter and the US-China trade war showing signs of de-escalating.

The committee also made the decision to continue with its asset purchase scheme. This scheme holds £435bn of government debt as well as £10bn in corporate bonds. The decision was unanimous in this case.  

Sweden Moves Out of Negative Rates

Another country where decisions had to be made on interest rates was Sweden. In this case, they have been living with negative rates for close to five years.

The Riksbank is the central bank in Sweden and is the oldest central bank on the planet. They announced that they would be raising their main interest rate – the repo rate - by 0.25%. This takes it up to 0%.
In their statement, the Riksbank mentioned that the decision to do this was based on inflation being close to the target of 2%.

Their time with negative interest rates began at the start of 2015. This was when the Riksbank dropped its rate to -0.1% for the first time ever. Two of the six decision-makers disagreed with the move to now increase rates.

The comments concerning the decision suggest that the rate will stay steady “in the coming years". They also plan to continue with their current monetary policy and to carry on purchasing government bonds as well. 

Meanwhile, in Norway, the central bank decided to not increase interest rates. The Norge Bank announced that their policy rate would stay at 1.5%. This figure has been slowly rising in the last year or so but is now expected to remain steady in the near future. Inflation in Norway is close to their targets and growth is slowing.