experienced a profound crisis. had the adjustment been made earlier and resulted in stability, perhaps the crisis would have been less painful. in recent years, however, the process of adjustment in sweden has come a long way. the economy is in the process of adjusting to the conditions that apply in a low inflation regime. this is being accompanied by an appreciable improvement in government finance, not least as a result of the extensive consolidation programme. from a two - digit level just a few years ago, for 1996 it seems that the government deficit has been reduced to between 3 and 3. 5 per cent of gdp. moreover, the improvement is expected to continue. that the consolidation of government finance proceeds successfully to the goal of balance in 1998 is of the utmost importance in that this lays a foundation for balanced, sustainable growth. with the new, globalised capital market, the need for discipline in economic policy soon makes itself felt, particularly for a country that has had a difficult period of deficits and has therefore become more dependent on domestic and foreign creditors. after all the experiences earlier in the 1990s, this is widely understood in sweden. the resolution with which the consolidation is being achieved has been questioned from time to time. however, the six - monthly control stations that are an integral part of the swedish consolidation programme have made - and continue to make - it possible for observers to monitor the political system ’ s determination in this respect to achieve the goal of balance in 1998. the current situation at the beginning of 1996, favourable prospects for inflation prompted a monetary policy realignment. continuously falling inflation expectations, accompanied by subdued demand, improved the outlook for inflation in 1996 and 1997. at the end of 1996 underlying rate of inflation was about 1. 5 per cent. the twelve - month rate of headline inflation, which was actually negative for some months in the latter part of 1996, was affected by temporary factors, above all as a result of the riksbank ’ s interest rate cuts. the better prospects for inflation paved the way for a notable reduction of the repo rate during 1996, from 8. 91 to 4. 10 per cent, the latter being the lowest instrumental rate in sweden for at least thirty years. together with the impact of the exchange rate, the overall monetary conditions are accordingly contributing to a continued recovery in the real economy. a shift in the composition of demand began in the course of 1996. but although the contribution to gdp growth from net exports decreased, the effect of foreign trade remains positive.

##vested in new bonds instead of used to pay dividends to the government. as a result of this, the riksbank has instead had to borrow from the banks that are its monetary policy counterparties to pay the dividends. this has contributed to the banks ’ net claims on the riksbank having increased by almost sek 50 billion over the past ten years, which has means that we have gone from having a monetary policy claim to a monetary policy liability. the riksbank has reintroduced a portfolio in swedish krona on the asset side, we now also have a portfolio of swedish government bonds in swedish krona. let me just comment here on why we have once again acquired a securities portfolio in swedish krona. most central banks have a securities portfolio in their own currency. the riksbank also had such a portfolio during the 1990s and this consisted mainly of government bonds, as well as a minor holding in treasury bills and mortgage bonds. in bis central bankers ’ speeches 2001, the portfolio was transferred to the swedish national debt office. in autumn 1999, the riksbank ’ s market commitment repo facility was transferred to the swedish national debt office and the assessment was made that a domestic securities portfolio at the riksbank would not fulfil any important monetary policy function. however, the experiences of the financial crisis 2008 – 2009 show how important it is to be able to quickly implement measures beyond the ordinary measures used by a central bank to implement monetary policy. during the crisis the riksbank took several extraordinary measures to improve the functioning of the financial markets and the monetary policy transmission mechanism. other central banks implemented similar measures. unlike many other central banks, the riksbank did not buy any government bonds or covered bonds, but these possibilities were discussed. one important lesson from the crisis is that new measures require considerable preparation. after the crisis, we therefore decided that it is a good idea to make practical preparations for a crisis even during normal circumstances by supplementing the riksbank ’ s toolbox with a limited securities portfolio in swedish krona. this ensures that necessary systems, agreements, routines and knowledge are already in place if it becomes necessary to quickly implement extraordinary measures. given that we now have a repo rate close to zero and we are discussing which unconventional measures might be appropriate if inflation does not rise towards two per cent, it is good that the riksbank has created the possibility and knowledge to manage a bond portfolio. this means that we now can quickly and simply