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Riksbank Announces More Measures To Mitigate Economic Downturn

Sweden's central bank unveiled additional measures to support economic developments and avoid problems in credit supply further exacerbating the economic consequences of the pandemic.

At an extraordinary meeting on Monday, the Executive Board of Riksbank decided to increase loans to banks on favorable terms and to increase quantitative easing.

The bank intends to buy securities for up to an additional SEK 300 billion. The bank will reduce the lending rate for overnight loans to banks from 0.75 to 0.20 percentage points above the repo rate.

The Riksbank will also offer banks to borrow an unlimited amount of money on a weekly basis against collateral at three months' maturity at an interest rate of 0.20 percentage points above the repo rate.

In order to increase flexibility, financial institutions were given more scope to use mortgage bonds as collateral when they borrow from the central bank.

The bank said it will help to facilitate credit supply and mitigate the downturn in the economy. The Riksbank said it is prepared to take additional measures if necessary.

Last week, the Riksbank had decided to lend up to SEK 500 billion to companies via the banks.

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