do today? swedish monetary policy cannot do anything about the causes of the weak demand from abroad, but it can mitigate the effects on the swedish economy. how low the repo rate needs to be, and how quickly inflation should rise towards the target are ultimately questions of judgement. i believe that it is appropriate that the riksbank has let the repo rate remain at one per cent since the end of last year in order to boost the swedish economy and to get inflation to rise to 2 per cent. according to the forecast, the repo rate will remain at this level until the end of 2014. in the forecast, the real interest rate will remain negative until the beginning of 2015, which shows that monetary policy is expansionary. monetary policy can mitigate the effects of weak development abroad an even lower repo rate could help inflation to return to the target somewhat more quickly, as illustrated in a monetary policy scenario in the monetary policy report published in july. according to the riksbank ’ s model calculations, a further repo - rate cut would lead to a further increase in consumption and increased investment. a lower repo rate would also weaken the exchange rate, which could benefit exports while at the same time making imports more expensive. all in all, this would lead to higher gdp growth and a higher level of resource utilisation, which would lead to a higher rate of price increases. according to the calculations in the monetary policy report, a 0. 25 percentage point lower repo rate for one bis central bankers ’ speeches year would lead cpif inflation to approach 2 per cent during the first half of 2015, which is approximately six months earlier than in the riksbank ’ s main scenario. 2 thereafter, in this example, cpif would be marginally above 2 per cent. looking at these calculations it appears that a lower repo - rate path would be the better strategy for stabilising cpif inflation and resource utilisation. however, this interpretation does not take into account the fact that there is uncertainty about the effects of monetary policy on the economy. the quantitative effects in the scenario are estimated using the riksbank ’ s macro model for the swedish economy, but such estimates entail a degree of uncertainty and other empirical approaches could lead to different results. a common result in the research literature is that if we take into account the fact that there is uncertainty about the impact of monetary policy then we should act more gradually over time. however, it may then take

current situation. the repo rate is low at present. the riksbank ’ s forecasts show that inflation will reach 2 per cent within the forecast period at the same time as resource utilisation will improve. although the global economy is weak at the moment, the preconditions for a recovery are in place. sweden is in a better position than many other countries, but there is work to be done to put an effective structure for macroprudential policy in place. once this structure is in place, we will be more able to manage the risks associated with the high level of household debt. monetary policy could of course be somewhat more expansionary in the short term but we must remember that monetary policy is not perfectly precise and we must have realistic expectations of what it can achieve in relation to the risks that exist. as i see it we are already at full stretch as far as household indebtedness is concerned. a continued low repo rate offers the possibility of good economic development in the short term and sustainable development in the long term. references apel, m. and c. a. claussen ( 2012 ), “ monetary policy, interest rates and risk taking ” economic review, 2012 : 2, sveriges riksbank. blanchard, o., g. dell ’ ariccia and p. mauro ( 2013 ), “ rethinking macro policy ii : getting granular ” imf staff discussion note 13 / 03, international monetary fund. brainard, w. c. ( 1967 ), “ uncertainty and the effectiveness of policy ” american economic review 57 : 2, 1967, pp. 411 – 425. imf ( 2013 ), “ sweden staff report for the 2013 article iv consultation ” country report no. 13 / 276, september 2013, international monetary fund. bis central bankers ’ speeches kilian, l. and s. manganelli ( 2003 ), “ the central bank as a risk manager : quantifying and forecasting inflation risks ” ecb working paper no. 226, april 2003, european central bank. sveriges riksbank ( 2012 ), “ long - run developments in the swedish labour market ” article in monetary policy report, july 2012. sveriges riksbank ( 2013 ), ” financial imbalances in the monetary policy assessment ” article in monetary policy report, july 2013. the world trade organization ( 2013 ) “ world trade 2012, prospects for 2013 ” press release april 10