to the worsening of the crisis in 2008. but the financial markets are still functioning much less efficiently than normal. it is also still difficult for companies to finance themselves in the capital market. the riksbank has also implemented a large number of unconventional measures to safeguard financial stability and mitigate the negative effects of the financial crisis. during the second half of 2008 the riksbank increased its lending to the banks by more than sek 450 billion. almost sek 200 billion of this was comprised of loans in us dollars. we have largely financed this through a swap agreement with the fed. our own foreign exchange reserve was not sufficiently large to manage such extensive lending in dollars. the increased lending has meant that the riksbank ’ s balance sheet grew during the second half of 2008 from around sek 200 billion to around sek 700 billion. we have also changed our collateral requirements so that the banks can offer more types of security as collateral and thus more easily sustain their functions in the market. we have given special liquidity assistance to kaupthing and carnegie to safeguard financial stability and ensure the functioning of the financial markets. we have begun offering loans with commercial paper as collateral to facilitate companies ’ financing. we have also signed swap agreements with iceland and latvia to support crisis management in these countries. and we have cut the interest rate. since the monetary policy meeting in february we have further extended these unconventional measures. we have decided on loans with longer maturities, with variable interest rates and with smaller supplements and we have signed a swap agreement with estonia. the swedish national debt office and finansinspektionen ( the swedish financial supervisory authority ) have also taken action to alleviate the financial crisis. the government has raised the state deposit guarantee and extended it to cover all types of deposits in accounts, it has introduced a guarantee programme, established a guarantee fund and decided on means of capital injections to the banks. at the same time, the government is conducting a more expansionary fiscal policy than before. i now intend to move on to describe international developments. international developments will be weak this year the world economy was in a slowdown phase even before september 2008. since then the deterioration in the world economy has been rapid. all of the large, developed economies are now in recession. during the fourth quarter of last year gdp growth in the united states and the euro area fell by around 6 per cent calculated on an annual rate. in japan the fall was even greater, more than 12 per cent calculated

it will be more severe than the most recent economic downturn in connection with the dotcom crash in 2000. this is indicated by the various measures of resource utilisation we regularly produce. since the monetary policy meeting in february statistics sweden has published the national accounts for the fourth quarter of 2008. gdp fell by just over 9 per cent calculated as an annual rate during the fourth quarter of 2008. this is the weakest rate of change measured during the period for which statistical comparisons are available, that is, since 1980. our forecast in the february monetary policy report assumed that gdp would fall by almost 4 per cent calculated as an annual rate during the fourth quarter. inflation will fall rapidly in 2008 cpi inflation rose up to september. it then peaked at 4. 4 per cent. since then inflation has fallen rapidly. in january 2009 it amounted to 1. 3 per cent. this was around a tenth more than we estimated at the most recent monetary policy meeting. a large part of the decline is due to the fall in mortgage rates and energy prices. underlying inflation measured as the cpif, which excludes changes in mortgage rates, amounted to 2. 1 per cent in january. this underlying inflation has also fallen in recent months, but not as much as cpi inflation. if one also excludes energy prices, underlying inflation amounted to 2. 4 per cent in january. food prices increased by around 5 per cent in january and are still holding up inflation. we see ahead of us that cpi inflation will continue to fall over the coming six months and that it will become negative for a large part of the year. but the heavy fall is mainly due to our cutting the repo rate, which means that mortgage rates fall. in addition, energy prices will be lower than one year ago, which will also push down inflation. at the beginning of 2010 the rate of increase of the cpi will quickly rise again and be over 3 per cent at the end of 2011. i shall return to this a little later. underlying inflation measured as the cpif excluding energy is calculated to be close to 2 per cent during the forecast period. it is kept up at the beginning of the period by the fact that unit labour costs, that is, the labour cost per unit produced, has increased relatively quickly in recent years as a result of weak development in productivity. the national accounts for 2008 point to weaker productivity and a larger increase in unit labour costs than we were expecting at our monetary policy meeting. moreover, the krona has