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Monetary Policy Report 2008:3
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  1. Monetary Policy Report 2008:3

  2. Repo rate cut to 3.75 per cent • Further cuts over the coming six months To alleviate the effects of the financial crisis on economic activity and to attain the inflation target of two per cent

  3. Repo rate cut • Financial crisis • Credit crunch • Deeper economic downturn • Lower inflationary pressures Other measures also necessary to improve the functioning of the markets

  4. The financial crisis… …affects for instance • Interest rates • Stock markets • Commodity prices • Exchange rates

  5. Interbank rate and repo ratePer cent Sources: Reuters EcoWin and the Riksbank

  6. Mortgage rates have risen more than the repo ratePer cent Refers to three-month mortgage rate from SBAB, three-month interbank rate and monthly average for three-month mortgage rate for mortgage institutions’ new lending. Sources: Reuters EcoWin, SBAB, Statistics Sweden and the Riksbank

  7. Falling stock marketsIndex, 1999-01-04=100 Source: Reuters EcoWin

  8. Lower oil priceBrent crude, USD per barrel Sources: Intercontinental Exchange and the Riksbank Note. Futures prices are calculated as a 15-day average.

  9. Falling commodity pricesUSD, index (2000 = 100) Source: The Economist

  10. Weaker kronaTrade-weighted exchange rate (TCW), index, 1992-11-18=100 Source: The Riksbank Note. Broken line refers to the Riksbank’s forecast (quarterly data).

  11. Deeper economic downturn • Lower capital value • More difficult to borrow • Lower demand from abroad • Increased uncertainty

  12. Lower growth abroad and in SwedenAnnual percentage change, calendar-adjusted data Sources: The IMF, Statistics Sweden and the Riksbank Note. Broken line and bar represents the Riksbank’s forecast.

  13. Pessimism among households…Net figures Source: National Institute of Economic Research

  14. … and in the business sectorSeasonally-adjusted index and net figures, manufacturing industry Sources: National Institute of Economic Research and Swedbank Note. Index over 50 is growth, under 50 is decline.

  15. Lower GDP growthQuarterly changes in per cent calculated as an annual rate, seasonally-adjusted data Sources: Statistics Sweden and the Riksbank Note. Broken lines represent the Riksbank’s forecasts.

  16. Lower employmentThousands, seasonally-adjusted data, 3-month moving average Source: Swedish Employment Service Note. Redundancy notices include outcomes to 20 October.

  17. Higher unemploymentPer cent of work force, seasonally-adjusted data Sources: Statistics Sweden and the Riksbank Note. Broken lines represent the Riksbank’s forecasts

  18. Lower inflationCPI, Annual percentage change Sources: Statistics Sweden and the Riksbank Note. Broken lines refer to the Riksbank’s forecasts

  19. Lower repo ratePer cent, quarterly average Source: The Riksbank Note. Broken lines represent the Riksbank’s forecasts

  20. Uncertainty in the forecasts • Global economic activity and financial crisis worsen • Higher inflationary pressures • Weaker krona

  21. Repo rate a forecast – not a promisePer cent, quarterly averages Source: The Riksbank

  22. Measures for the financial system • Loans (against collateral) in SEK and USD • Changed collateral requirements • Liquidity assistance to Kaupthing

  23. Riksbank’s loans Offered Implemented SEK SEK 280 billion SEK 180 billion (Further SEK 80 billion Monday 27/10) USD USD 27 billion USD 27 billion (approx. SEK 130 billion) Assumption: 1 USD=7.5 SEK

  24. Measures taken by the Government sector • The Riksbank SEK 380 billion • Swedish National Debt Office SEK 100 billion (Can be compared with outstanding stock of covered mortgage bonds: approx. SEK 1 000 billion at end of August 2008) • Government • Finansinspektionen(Swedish Financial Supervisory Authority)

  25. Repo rate a forecast – not a promisePer cent, quarterly averages Source: The Riksbank