Stefan Ingves: Introduction on monetary policy
Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the Riksdag Committee
on Finance, Stockholm, 26 February 2009.
* * *
In September last year the global financial crisis gained a serious hold on the Swedish
financial markets. Since then the Riksbank has cut the repo rate by a total of 3.75
percentage points to 1 per cent - the lowest level since the inflation target came into force in
1995.
We have had outstanding loans to the banks of on average around SEK 370 billion since the
end of September, slightly more than half of which has been loans in US dollars.1 We are
offering loans at longer maturities than normal. We have extended the types of securities that
can be used as collateral for loans in the Riksbank. We have provided special liquidity
assistance to two financial institutions; Kaupthing Bank Sverige and Carnegie.
Since the end of September we have implemented measures that have meant our balance
sheet total has almost tripled! This sounds rather dramatic. At least in relation to the past 15
years. But managing our tasks, attaining the inflation target and safeguarding financial
stability, makes different demands under different circumstances. The circumstances in
recent months have required tools we do not normally need to take out of our toolbox. They
have also required greater flexibility, speed and force in our actions.
When I was out ice skating at Norrviken not far from here a couple of weeks ago a metaphor
came to mind for the way the Riksbank has to adapt to different conditions as they occur. It
should be appropriate in this winter holiday period. Say that the ice you are skating on is
good, but seems to become gradually worse the further you go. Then there is no harm in
going a bit further - waiting and seeing what happens - as long as you are observant.
Perhaps you will change course slightly to be on the safe side. More than that is not
necessary. But let us say instead that the ice is suddenly really thin. Then it is no longer a
good idea to keep on going and wait and see what happens further ahead. A minor change
of course is not enough. If the conditions become really bad you will have to do even more -
turn around immediately - to get back onto safe ice.
What I am trying to say is not that we are skating on thin ice. What I mean is that decisions
are linked to, and must also be assessed on the basis of the situation in which they are taken
- what information is available and what one believes lies ahead. Like when you are
wondering whether you should carry on skating on ice that may be uncertain. How much do
you need to change course for everything to go well? Like when we Executive Board
members take a decision on what interest rate path is needed for inflation to be close to the
target of 2 per cent a couple of years ahead. How much do we need to change it and how
quickly?
Decisions in times of uncertainty and how we manage this is a recurring theme today. You
members of the Committee on Finance will later be asking questions on the basis of the
material for assessing monetary policy published by the Riksbank on 16 February.2 Your
views on our interest rate decisions of recent years - whether you consider they were
wellbalanced given the information at the disposal of the Executive Board at the time the
decision was made - comprise important information for us. I am therefore looking forward to
discussing the assessment later, during the actual hearing. But first I would like to talk about
how the financial crisis affects the conditions for our policy. I shall also discuss the most
recent interest rate decision and our readiness for dealing with unexpected economic
developments.
The financial crisis affects the conditions for monetary policy
For a long time, the global financial crisis only had a fairly limited effect on the Swedish
economy. But when the US investment bank Lehman Brothers filed for bankruptcy in
September the uncertainty over borrowers' credit ratings increased dramatically. Access to
credit in the financial markets around the world declined and the interbank rates, that is,
interest on loans between banks, rose substantially in Sweden, too. In a couple of days we
went from a situation where Swedish financial markets were functioning fairly well to one
where some sub-markets were in principle at a standstill. We also went from expectations of
a fairly smooth slowdown in economic activity, to significantly more gloomy economic
prospects.
I myself was sitting in a meeting in Frankfurt when I was told over the telephone that the
Swedish treasury bill market had been put on hold. This was on 18 September and it was
now clear that events had put a spanner in our otherwise well-oiled financial works. This
changed the conditions for our policy. Although monetary policy and financial stability have
always been closely linked, under the circumstances that have prevailed since September
one can say that the dividing lines between our two main tasks have in many ways been
erased.
Financial stability affects monetary policy...
Our most important tool in conducting monetary policy is normally the repo rate. By adjusting
it we can influence, by means of the banks and the rest of the financial system, the interest
rates faced by households and companies when borrowing money. In this way we try to
influence activity in the economy and ultimately inflation. It is therefore necessary for the
payment system and credit markets to function so we can carry out our monetary policy
tasks efficiently. Financial stability is thus a necessary condition for efficient monetary policy.
As I have said on an earlier occasion, our task of safeguarding financial stability is in some
ways like taking care of an electricity network. Most people give it very little thought until
there is a power failure. But since last autumn one can say that there have been severe
disruptions in the network and numerous measures have been required to keep the
electricity flowing. Although there are some indications that the crisis is not as acute now as it
was last autumn, many markets would probably not be functioning if the authorities in various
countries were not regularly taking measures to promote financial stability.
The effects of the crisis are also still affecting the situation for monetary policy and access to
credit in the economy. Although the spread between Swedish mortgage rates and risk-free
securities such as government bonds has declined since the most intensive phase of the
crisis, households are for instance still facing slightly higher interest rates than normal if they
want to fix their mortgage rates at longer periods. The financial crisis may also result in
declining access to credit. Many companies in the Riksbank's company survey state, for
instance, that they are finding it difficult to borrow at longer maturities. The financial crisis has
also contributed to a fall in equity and house prices. Lower wealth, together with the
widespread uncertainty over future events, may lead to companies and households
postponing investment and consumption. All of this affects the activity in the economy and is
something we must take into account when formulating our policy. Many measures that are
taken mainly with the aim of safeguarding financial stability at the same time have monetary
policy effects. For instance, measures that lead to greater confidence in the markets
contribute to lower interest rates and increased access to credit.
...and monetary policy affects financial stability.
But inversely, monetary policy also has an effect on financial stability through its influence on
economic activity. An economic downturn normally leads to unemployment rising and more
companies going bankrupt. Households and companies find it more difficult to pay interest
and amortise their loans and the banks risk facing loan losses. The banks become more
cautious, require larger margins and collateral as compensation for lending money. This
reduces the supply of credit, which further reinforces the downturn in economic activity. In
addition, it may be the case that the banks earn less money from their lending in such a
situation. Lower wealth together with greater uncertainty over future economic developments
can mean that households and companies neither will nor can borrow as much. To the extent
that monetary policy measures alleviate the fall in economic activity, they are also beneficial
to financial stability.
Measures to create confidence
The Riksbank and other authorities, both in Sweden and abroad, have regularly injected oil
into the machinery to ensure that financial markets function more smoothly. To alleviate the
type of effects I just mentioned. As I said earlier, in our case it is a question of taking
measures to directly increase the access to loans in SEK and USD, providing the banks with
loans at longer maturities and against a broader spectrum of collateral than normal. By
allowing the banks to borrow against newly-issued commercial paper, we have also tried to
facilitate the supply of credit to the corporate sector, although interest in these auctions has
so far been moderate. As you know, we have also granted special liquidity assistance to
Kaupthing and Carnegie. Other authorities have also taken significant measures. These
include various market measures taken by the Swedish National Debt Office and the fact that
the Riksdag and Government have decided on and implemented guarantee programmes and
changes in the law.
It is quite simply a question of using various tools that complement one another and together
help to restore confidence in the markets. In some cases it merely concerns "being there" in
the background in various ways. The total, massive stability measures taken around the
world have had an effect. The fact that the spread between interbank rates and treasury bill
rates with the same maturity has fallen is one example of this. But many ups and downs and
a lot of work remain before we can declare this crisis officially over. And it is in the light of this
that we must formulate our monetary policy.
The financial crisis has affected the conditions for our actions - how we need to work to
manage our two main tasks. As long as the conditions require it, we will also take whatever
measures necessary to safeguard financial stability. When necessary we will also act with
greater flexibility, speed and force than usual regarding our monetary policy. The latter also
affected our most recent interest rate decision and I will now go on to talk about this in more
detail.
The most recent interest rate decision
As I have already mentioned, economic activity has weakened unusually quickly. In addition,
there is considerable uncertainty regarding economic developments. To dampen the fall in
production and employment, and to manage the inflation target of 2 per cent, our
assessment was that it was necessary to adjust the interest rate forecast downwards and to
quickly cut the interest rate at the same time. We therefore decided just over two weeks ago
to cut the repo rate from 2 per cent to 1 per cent. We are also assuming that the interest rate
will remain at around the same level over the coming year, with some probability of a further
cut being necessary.
But the prospects are brighter further ahead. We are expecting that the measures taken by
us and other authorities, both in Sweden and abroad, will contribute to the Swedish economy
beginning a recovery next year. We are therefore expecting to begin raising the interest rate
again towards the end of 2010, and fairly quickly, to just over 3 per cent at the end of our
forecast period.
Sharp deterioration in world economic activity...
The main reason why we cut the repo rate and adjusted the interest rate forecast in this way
is that economic activity has weakened both in Sweden and abroad - much more than we
had expected in the assessment we made in December. To return to my ice skating
metaphor - we were once again in a situation where conditions had changed so quickly that
it was also necessary to change course significantly and at once.
Households' and companies' expectations of future economic prospects are now as low as
they were during the crisis in the 1990s. And since last autumn in principle all types of
confidence indicators around the world have fallen substantially. Almost all statistics on
economic activity published since our December assessment have been worse than
expected. The situation looks particularly gloomy in the United States and the euro area, but
prospects have deteriorated more or less around the world. We have revised down our
forecasts for growth in the world economy, and GDP in the countries that are our most
important trading partners is expected to fall by around 2 per cent on average in 2009.
The fact that the economic downturn has worsened so substantially is largely due to the
global financial crisis. The crisis leads to higher risk premiums and limited access to loans for
households and companies. It also contributes to uncertainty and to lower wealth, which
leads to a decline in consumption and investment. I have mentioned this earlier. The
uncertainty regarding economic developments in the world in the future is also very
widespread.
...naturally affects a small, open economy...
A small, open economy like the Swedish one is of course very much affected when world
economic activity slows down. The statistics received show, for instance, that exports and
export orders have fallen drastically. The krona has also remained weak, which is something
that often happens to the currencies of small economies in times of turmoil. A weaker krona
normally stimulates exports and thus growth. But as demand is also weak abroad, it is not
certain that the effects will be so great. In addition, a weaker exchange rate means that
imported goods will be more expensive, which pushes up inflation. But this effect is largely
counteracted by the expectation that cost pressures and resource utilisation will be lower.
Labour market prospects have also deteriorated. The number of redundancy notices has
remained as high as it was in the autumn. Our forecast is that unemployment will rise to just
over 9 per cent during the latter part of 2010. Both the number of persons employed and the
number of hours worked will fall. Labour productivity has been weak over a long period of
time; it has even fallen, but in 2009 GDP is expected to grow more quickly than the number
of hours worked. Productivity will thus increase again, albeit weakly to start with. We are
expecting productivity growth to average at just under 3 per cent in 2010 and 2011.
...but brighter prospects await after the decline
The picture I have now painted is certainly not very cheerful. But global growth is expected to
bottom out this year. Developments do look brighter for most countries as early as the
beginning of 2010. As with all economic downturns, sooner or later there will be an upturn,
although it may take time. It is necessary to adjust to the new conditions and it may take
some time before households and companies have the confidence to begin consuming and
investing again. But once the adjustment has come, when consumption and investment have
picked up, the wheels of the economy will begin to turn more quickly. The stimulation from
monetary policy, fiscal policy and other measures around the world will also contribute to
dampening the decline and speeding up the recovery that is waiting around the corner.
As I said, growth here at home has weakened rapidly as well. Our assessment is that GDP
during the final quarter of last year fell by almost 4 per cent on an annual rate, compared with
the previous quarter. But we are also assuming that economic policy and various measures
will slow down the fall in Sweden. The weak krona will also provide some assistance. And
brighter prospects are in sight! We are expecting GDP to show a turnaround at the end of
2009, although growth will then be fairly modest over the coming two years. But as growth
abroad increases it will also stimulate the Swedish economy. We are therefore assuming that
growth will be around 4 per cent at the end of our forecast period.
However, the forecasts are of course very uncertain in this situation. And there are
uncertainty factors that can push developments in different directions. One of the
prerequisites for our forecasts is that the measures taken to improve the functioning of the
financial markets will have an effect. But in a crisis that is as closely linked to lack of
confidence as this one, the recovery could come very quickly once the distrust is dispelled.
We assume that our forecast is fairly cautious. Compared with other recessions, the recovery
predicted for Sweden is fairly slow, although quicker than that following the financial crisis of
the 1990s.
Large fluctuations in CPI inflation and the interest rate
We are expecting fairly large fluctuations in CPI inflation in the coming period. This is largely
connected to the substantial changes in the repo rate in our forecast. Our inflation target is
formulated in terms of the change in the CPI, and I would therefore like to pause and develop
this a little further.
CPI inflation has fallen rapidly in recent months and we are assuming that this will continue
during 2009. The annual change in the CPI is expected to be at its lowest in September this
year, when it will be -1.6 per cent. This fall is largely due to the rapid interest rate cuts we
have made during the autumn and now in February having an impact on the part of the CPI
that reflects housing costs. It is also due to the fall in energy prices.
However, if one disregards the cost of mortgage rates the picture is quite different. Inflation
measured in terms of the CPIF, which disregards changes in mortgage rates, is around 1.6
per cent on average in 2009. And if one moreover disregards the change in energy costs
from the CPIF the forecast is even higher. According to our assessment, the CPIF excluding
energy will increase on average by just over 2.2 per cent a year.
There are several reasons why underlying inflation trend is being held up. Unit labour costs
have increased fairly rapidly over the past two years and resource utilisation has been high.
In addition, the krona has been weaker, which contributes to higher import prices. With effect
from 2010, CPI inflation will also rise, according to our forecast. Once again interest rate
changes have had a powerful impact, but they are now pushing in the opposite direction. In
2010 we are expecting to raise the repo rate again. Mortgage rates will then cease falling
and begin to rise instead. At the same time, energy prices will begin to rise slightly. The repo
rate will then be raised fairly rapidly, from a level of around 1 per cent to around 3 per cent at
the end of the forecast period.
The fact that I am now talking about the forecast for the CPIF should not be interpreted to
mean that we have changed the monetary policy target. Our target is still that CPI inflation
shall be 2 per cent. But we are also constantly studying a number of other measures of
inflation. In this situation with exceptionally large changes in the repo rate -first down to just
below one per cent and then rapid increases at the end of the forecast period - it is very
important to openly and clearly illustrate the direct consequences this can have on the CPI.
However, in the longer term, beyond the horizon for our forecast, the repo rate is assumed to
be stable and then the rate of increase in the CPI and the CPIF will coincide.
To summarise - with the most recent interest rate cut and the forecast for the future interest
rate we are expecting to be able to counteract the restraining effects of the financial crisis on
the Swedish economy. The economy will gradually return to a more normal situation and the
Swedish economy will begin to recover next year. Resource utilisation will be lower than
normal for the entire forecast period but will rise in 2011. We are assuming that CPI inflation
adjusted for the effects of changes in mortgage rates will be close to the target of 2 per cent
at the end of the forecast period.
Uncertainty but also preparedness for unexpected developments
It is important to bear in mind that economic prospects are unusually uncertain at the
moment. For example, it may take longer than expected before the financial markets function
normally once again. It is also possible that the effects of the economic policy will come
sooner and with greater force than anticipated in our main scenario. The future direction for
monetary policy will depend, as always, on how new information on economic developments
abroad and in Sweden will affect the prospects for inflation and economic activity in Sweden.
The Riksbank's decisions are based on forecasts for a more or less uncertain future.
Unforeseen events in principle occur all the time. This is something we have to live with, no
matter how good are forecasts are. To return to the ice skating metaphor, you may fall
through the ice despite being careful. But then you will hopefully have both the equipment
and the training to manage to get out of the water and get home in dry extra clothing.
Everything may not happen exactly as you have trained for, but you know what to do - you
have both the tools and the techniques required.
And we do. We are well-prepared to manage our task, even when there is turmoil in the
world around us and when unforeseen events occur. We are aware that extraordinary events
may require extraordinary measures. If necessary, we can act both quickly and forcefully. If
necessary, we can implement more unconventional measures as a complement to our
interest rate policy. This is the way we have worked so far, and this is what we will continue
to do. If necessary!
Concluding reflections - why are things better this time?
There have been many gloomy headlines regarding economic developments recently. We
are certainly in an economic downturn. And the global financial crisis will probably affect us
all for some time to come. But, particularly in the light of all of the measures taken and those
that will be taken around the world, we are expecting economic activity in Sweden to pick up
again next year.
After our most recent interest rate decision some analysts wondered why we believe that the
Swedish economy will recover more quickly now than after the crisis at the beginning of the
1990s. Let me go back a little way to 18 September last year when the market for treasury
bills was put on hold. I spoke that day with the Director General of the Swedish National Debt
Office, Bo Lundgren, with whom I worked during my time at the Swedish Bank Support
Authority in the 1990s. It was not without some feelings of déjà vu. But at the same time I felt
then - and still feel - confident that a lot of things are different. That is, better!
Of course we are an export-dependent economy and of course economic activity abroad
looks worse than it did at the beginning of the 1990s. The effects of the global financial crisis
contribute to considerable uncertainty and also make the situation very difficult to assess.
One example of this is the economic downturn and adjustment the Baltic countries still have
to work their way through, something that of course affects the Swedish banks with
operations there. But there is on the other hand a lot in our favour. We do not have a
"homemade" bank crisis now as we did at the beginning of the 1990s. Swedish banks have on the
whole been much more responsible in granting credit, compared with the lending merry-go-
round that followed the deregulation of the credit markets in the 1980s. We have not entered
into an economic downturn with an economy that it out of balance, as we did then. Today we
have instead a surplus on the current account and sound public finances that provide a
different degree of freedom for fiscal policy. Nor do we have a starting situation with nominal
interest rates in some cases way above 10 per cent as we did then. The current established
inflation target also provides scope for stimulation from monetary policy. The interest rates in
the economy are relatively low, despite the crisis, and we are expecting the real repo rate to
be very low over the coming years. All of this means that things should go better this time.
There probably remains a lot of hard work before we can leave this financial crisis behind us
- until we reach a situation where the financial markets are functioning efficiently without the
aid of government measures, and where uncertainty over future developments has taken on
more normal proportions. But in addition to the measures aimed at managing the more acute
stage of the crisis, a number of changes that may provide a more stable, better development
have begun to take shape around the world. As I said last time I was here - once we have
closed the accounts on this crisis, we will hopefully have purged the parts that function poorly
and replaced them with something better. I am still convinced that we will succeed in this
together!
Lending to Swedish banks
500000 500000
SEK, against commercial paper
USD
450000 450000
SEK
400000 400000
350000 350000
300000 300000
250000 250000
200000 200000
150000 150000
100000 100000
50000 50000
0 0
okt-08 nov-08 dec-08 jan-09 feb-09
oct-08
Source: the Riksbank
Acting in different ways under
different circumstances

Extraordinary events often require
extraordinary measures

Other " tools"

Greater speed, flexibility and force

Decisions - what information do you have
and what do you foresee ahead? A
metaphor...
Foto: Fredrik Edin, Cykloteket Racing Team
Reduced spread between mortgage rate and repo rate but risk
premium for longer maturities still higher than normal
Percentage points
MPR09:1
3.5 3.5
Difference between mortgage rates (5 year) and government bond (5 year)
Difference between 3-month mortgage rates and the repo rate
3.0 3.0
2.5 2.5
2.0 2.0
1.5 1.5
1.0 1.0
0.5 0.5
0.0 0.0
Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
Note. Mortgage rates refer to average listed rates.
Sources: Reuters EcoWin and the Riksbank
BIS Review 23/2009
Almost two "different worlds"

Dramatic change in circumstances after Lehman Brothers
filed for bankruptcy in September

From a situation where the Swedish financial markets are
functioning fairly well, to one where some sub-markets
were on hold

From expectations of a fairly smooth downturn in
economic activity, to much poorer prospects
Changed conditions for our policy
Financial crisis not yet over

Monetary policy and financial stability
-the tasks are always closely linked, but...
-under conditions such as a financial crisis the
dividing lines have been erased

Measures to safeguard financial stability are
significant for monetary policy and vice versa
Uncertainty and lower wealth could lead to reduced
consumption and "precautionary saving"...
Per cent of disposable income
500 14
Net assets (left)
Financial saving (right)
450 12
400 10
350 8
300 6
250 4
200 2
150 0
100 -2
50 -4
0 -6
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Source: Statistics Sweden
The Riksbank's measures

Loans (against collateral) in SEK and USD

Change in collateral requirements

Special liquidity support

Commercial paper

Further measures may be necessary
Expansionary monetary policy around the world
Per cent
8 8
Sweden
USA
7 7
United Kingdom
Norway
6 Euro area 6
5 5
4 4
3 3
2 2
1 1
0 0
00 01 02 03 04 05 06 07 08 09
Source: Reuters EcoWin
Repo rate decision and forecast in brief

Severe deterioration in economic activity

Repo rate cut to 1 per cent

Repo rate forecast adjusted downwards
Necessary to:

reduce the fall in production and employment and...

attain the inflation target of 2 per cent
Recovery will begin in 2010
Repo rate path a forecast - not a
promise
Per cent, quarterly average
7 7
90%
75%
6 6
50%
Repo rate
5 5
4 4
3 3
2 2
1 1
0 0
-1 -1
04 05 06 07 08 09 10 11 12
Note. The broken line represents the Riksbank's forecast
Source: The Riksbank
Real repo rate...
4 4
Real repo rate
February
3 3
December
2 2
1 1
0 0
-1 -1
-2 -2
-3 -3
04 05 06 07 08 09 10 11 12
Source: The Riksbank
Downward revision in Consensus
forecasts for GDP growth 2009
Annual percentage change
7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
-1 Japan Euro area -1
USA Asia
-2 Eastern Europe Latin America -2
-3 -3
08-Jan 08-Mar 08-May 08-Jul 08-Sep 08-Nov 09-Jan
Source: Consensus
Sharp fall in orders and exports
Annual percentage change, seasonally-adjusted data
35 35
Orders received, export market
30 30
Exports
25 25
20 20
15 15
10 10
5 5
0 0
-5 -5
-10 -10
-15 -15
-20 -20
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Note. Three-month moving average, goods exports in fixed prices calculated by the Riksbank.
Sources: Statistics Sweden and the Riksbank
Higher unemployment
Per cent of labour force, seasonally-adjusted data
14 14
Unemployment 16-64 year
Unemployment 15-74 year
12 12
February
December
10 10
8 8
6 6
4 4
2 2
0 0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Sources: Statistics Sweden and the Riksbank
Note. Broken lines represent the Riksbank's forecasts.
Forecast for GDP growth in Sweden and abroad
Quarterly change in per cent calculated as an annual rate,
seasonallyadjusted data
5 5
4 4
3 3
2 2
1 1
0 0
-1 -1
-2 Sweden -2
USA
-3 -3
Euro area
TCW
-4 -4
-5 -5
07 08 09 10 11 12
Sources: Bureau of Economic Analysis, Eurostat,
Note. Broken lines represent the Riksbank's forecasts.
Statistics Sweden and the Riksbank
Recovery will begin in 2010

The measures implemented will take effect

Credit markets will function better

Confidence will return to households and
companies

Consumption and investment will increase
Large fluctuations in the CPI
Annual percentage change
MPR09:1
5.0 5.0
CPI
CPIF
4.0 4.0
3.0 3.0
2.0 2.0
1.0 1.0
0.0 0.0
-1.0 -1.0
-2.0 -2.0
00 01 02 03 04 05 06 07 08 09 10 11 12
Note. Broken lines represent the Riksbank's forecasts.
Sources: Statistics Sweden and the Riksbank
Unusually great uncertainty in the
forecasts

The crisis may worsen but ...

The recovery may also come sooner

Weaker exchange rate and lower productivity
growth may lead to higher inflation
Extraordinary events may require extraordinary measures...
...but we are prepared!
Many gloomy headlines, but a turnaround will
come eventually
Why will things go better this time?

Although there are factors that look worse than
in the 1990s

International economic activity

Uncertainty over global financial crisis

There are many more that look better now...
So why will things go better this time?

Not a " home-made" crisis

Surplus on current account

Sound public finances

Better conditions for both fiscal and monetary
policy

Lower interest rates to start with

Updated regulations, focus on borrowing and
capital
Comparison of recoveries after different
recessions, GDP Sweden
Level, index=100 final quarter before recession begins
115 115
2008 Q1
2000 Q3
1996 Q1
1990 Q2
110 110
105 105
100 100
95 95
90 90
-4 -2 0 2 4 6 8 10 12 14 16
Note. Broken lines represent the Riksbank's forecasts.
Sources: Statistics Sweden and the Riksbank
Legends refer to quarter when recession begins.
BIS Review 23/2009
Lower interest rate to subdue fall in production and
employment and attain inflation target of 2 per cent
The Riksbank will continue to take the measures
required to safeguard financial stability
Repo rate forecast 2008, per cent,
quarterly averages
5,0 5,0
4,5 4,5
4,0 4,0
3,5 3,5
3,0 3,0
2,5 2,5
2,0 2,0
1,5 1,5
Repo rate
Repo rate forecast MPR 08:1
1,0 1,0
Repo rate forecast MPR 08:2
Repo rate forecast MPR 08:3
0,5 0,5
MPU December 08
0,0 0,0
02 03 04 05 06 07 08 09 10 11
Note. PPR denotes Monetary Policy Report och PPU denotes Monetary Policy Update. Source: The Riksbank.
Profits before credit losses and net credit losses, in the
major banks, summarised over four quarters, SEK billion
at 2008 prices
100
80
Profit before credit losses
Credit losses
60
40
20
0
-20
dec -90 dec -92 dec -94 dec -96 dec -98 dec -00 dec -02 dec -04 dec -06 dec -08
Note. International Financial Reporting Standards applied from and including the first quarter 2005.
Sources: Bank reports and the Riksbank.
BIS Review 23/2009