The increasingly low rate of inflation led to a series of repo rate cuts. In February 2015, the repo rate became negative for the first time. The Riksbank also started to purchase government bonds to lower interest rates in general across the economy.
After the zero repo rate was introduced in October 2104, uncertainty in the global economy increased further and inflationary pressures continued to be much too low. The Riksbank took the drastic step of introducing a negative repo rate of -0.10%. This was the first time in Swedish history that we had a negative rate. The repo rate was thereby deemed to be close to its lower limit.
But to make monetary policy even more expansionary, purchases of government bonds were also decided upon. These purchases increase the money supply in the economy and thereby drive inflation. The Riksbank was not alone in its actions this time either. Direct purchases on the bond markets, known as quantitative easing, had already been carried out on a large scale by both the US central bank (the Federal Reserve) and its European equivalent, the European Central Bank (ECB).
