Guide: Everything you need to know about the repo rate

What is the repo rate?

The repo rate is the banks' interest rate.

It determines how much the banks have to pay to borrow money from the Riksbank, which in turn affects the rest of the market.

That is why it is often called the policy rate.

Lowering the repo rate makes life easier for the banks.

Then it will also be cheaper for Swedes to borrow money, and then consumption will increase.

If you want to slow down inflation instead, you can raise the repo rate.

Then you pull the brakes on the entire society's consumption.

But wait - what is inflation?

Inflation means that the value of our money decreases.

As inflation increases, it also becomes more expensive to live and shop.

Inflation can occur if the price of our imported goods rises.

An example is what is happening now, that the oil price is rising.

Then the transports become more expensive and the companies then compensate with higher prices for, for example, food.

This in turn can lead to people wanting more in pay to be able to afford the more expensive goods.

The Riksbank wants to keep inflation stable.

To regulate this, they have the repo rate.

Why is the repo rate not raised now then - we have high inflation?

This is because the Riksbank does not believe that high inflation will continue.

They believe that fuel prices and electricity prices will fall again.

But there are others who believe that we will have high inflation for a long time to come.

Therefore, they also think that the repo rate should be raised slightly.

The fact that the repo rate remains at zero can be seen as a signal that the Riksbank wants us to continue consuming, and above all that companies should do so.

Why is stable inflation important?

If inflation is rising, you can get what is called hyperinflation.

Then the money will be worth almost nothing.

Far too low inflation, on the other hand, can mean that it becomes too cheap to borrow.

Then there is the risk that many people buy expensive houses and cars that they can not really afford.

Does the repo rate affect our food prices?

Yes, in a way.

If the repo rate is raised, the Swedish krona will become "more valuable" in the international market and then prices will fall because the purchasing power of Swedes increases.

However, the fact that food prices are high right now is mainly due to other things, such as higher oil and energy prices.

How are housing prices affected by the repo rate?

After the repo rate remains at 0 percent, no drastic changes in mortgage rates are expected in the near future.

At the same time, several banks are flagging that interest rates will be raised in the future - due to increased inflation abroad.