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

above the prevailing level in other industrialised countries. in a climate of excess liquidity, historically very low global interest rates and risk - seeking investors, it was only to be expected that investors would notice high - yield instruments in icelandic currency. so no one need have been surprised when the first krona - denominated bonds, known as glacier bonds, were issued in the global market in autumn 2005. issuance was driven by carry trades and global investors ’ search for yields, and partly also by the demand for credit in iceland. despite the great deal of information that is generally available about the economic position and outlook in iceland, and the central bank ’ s very candid appraisal of the exchange rate of the krona in autumn 2005, which i have already described, it seems certain that many investors in glacier bonds, at least during the first months of issuance, had not examined the potential risks properly. investors probably bore in mind iceland ’ s high sovereign rating in their decisions but ignored the risk that the krona might still depreciate, given that the real exchange rate was far above the average for the past quarter - century. at least, this risk was obscured by high interest rates. in the turmoil in early 2006, various investors in glacier bonds, institutional investors in particular, are likely to have closed their positions from autumn 2005 and thereby contributed to the depreciation of the krona, losing sizeable funds in the process. glacier bond issuance has gone in waves, largely in line with global movements in carry trades. it was substantial in autumn 2005, dropped sharply in the first half of 2006, then picked up in the autumn and has been fairly large since then. currently the outstanding amount of glacier bonds is equivalent to roughly a third of gdp. the first issues matured in autumn 2006 and several others since then. maturities have not sent tremors through the fx market, even when relatively large issues mature. this is consistent with the experience of countries such as new zealand, where “ kiwi bonds ” denominated in the new zealand dollar have been issued for much longer than glacier bonds. large issues of glacier bonds will mature shortly and it cannot be ruled out that they will cause some unease. there have been a number of effects from the glacier bond issuance. derivatives in connection with these issues have dampened the impact of central bank policy rate changes on other interest rates in domestic financial markets. glacier bonds thereby delayed the transmission of monetary policy measures, divert