Authored by Henrik Erikson and David Vestin, Monetary Policy Department of the Swedish Riksbank.
In this memo, we present stylized facts on the pass-through of policy rate cuts below zero to interest rates on securities traded in the capital markets and to bank lending rates to firms and households. We find that negative policy rates seems to have had a strong and immediate pass-through to yields on securities traded in the markets and to lending rates to firms. Pass-through appears though to have been somewhat slower and weaker for lending rates to households.
Our conclusion is that several transmission channels, e.g. channels working through capital market interest rates and therefore the exchange rate, were fully active at negative rates. While the bank lending channel might have been slightly muted for households, our conclusion is that mildly negative interest rates have successfully contributed to more expansionary monetary policy. Download the complete memo entitled Pass-through at Mildly Negative Policy Rates: The Swedish Case here.