Tuesday, the minutes of the monetary policy meeting of Riksbank held on April 20 revealed that the interest rate is expected to stay at a low level until the beginning of 2011. If economic activity deteriorates more than expected in the future, the Riksbank has the possibility to take other measures, the minutes showed.
In its April meeting, the Executive Board of the central bank had reduced its key interest rate by 50 basis points to a record low of 0.5%. Lars Svensson sought a 0.75 percentage point reduction.
It is always necessary to be prepared to be able to implement an alternative monetary policy if developments should require this, but such measures do not need to be implemented from today, Governor, Stefan Ingves said.
Purchasing government bonds can be regarded as the most natural extension of conventional monetary policy and such operations can reduce the long-term rate. Buying bonds will not probably arise until the central bank has done everything that can be done to facilitate the supply of credit with the aid of changes in terms for lending and deposits at the Riksbank.
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