Posted on 07/06/2009 7:02:25 PM PDT by Lorianne
STOCKHOLM__Sweden's Riksbank cut interest rates to a fresh record low on Thursday and offered banks 100 billion crowns ($13.2 billion) to boost lending as it strives to reverse the country's worst recession since the 1940s.
The central bank lowered its key interest rate by 25 basis points to 0.25 percent in a surprise move, putting official rates at their lowest since records began in 1907, and said it expected rates to remain at that level until late 2010.
"The deposit rates are actually negative now. In some sense they are creating a money machine for banks. You can lend all you want, but don't put that back into the central bank."
Nearly all economists in a Reuters poll had expected the Riksbank to keep rates on hold at 0.5 percent, in line with a previous central bank forecast that suggested rates would stay around that level at least until early next year.
The Riksbank said the economy had worsened further since its previous meeting, in April, and it expected the repo rate to remain at 0.25 percent until autumn 2010.
"The Riksbank's assessment is that after cutting the repo rate to 0.25 percent it will have reached its lower limit in practice, and that the situation on the financial markets is still not completely normal," it said in a statement.
Deputy Governor Lars Svensson disagreed with the decision and advocated a cut to zero.
Sweden was plunged into recession late last year as the global financial crisis pulled the plug on market demand, leaving firms such as world number two truck firm Volvo scrambling to cut costs and shed jobs.
The central bank forecast the economy will contract 5.4 percent this year and return to tepid growth of 1.4 percent next year
(Excerpt) Read more at guardian.co.uk ...
Ain’t it interesting that the only thing that repairs the DAMAGE OF SOCIALISM is some CAPITALISM!!!
Hey! Send me some of that free money!
If anyone is wondering why “boosting lending” is such a priority, it is because in a debt money system, money is created when it is loaned out and destroyed when it is repaid. If the volume of money being created (loaned) does not keep up and surpass the money being destroyed (paid back) then the economy goes bad.
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