Phase 2 in Figure 5 describes developments last year up until December. We are now in the early stages of phase 3: The repo rate is starting to be raised, while reinvestments are continuing so that the bond holdings are more or less held constant. We have communicated that we will reinvest principal payments and coupons “until further notice”, but we have brought forward reinvestments of large principal payments that are due during the first half of this year to obtain a more even reinvestment profile over time. An issue we need to address during the spring is how to manage reinvestments of the principal payments due next year. Phase 4 in Figure 5 implies that the repo rate has been raised slightly more. Not until then do the bond holdings start to decrease. The fifth phase in Figure 5 actually concerns developments in the long term. Our strategy is that the repo rate and the repo rate path will in the long term revert to being the main monetary policy tools. Purchases of government bonds or other securities then act as a complement when the policy rate is close to its lower bound. Figure 6 shows the Riksbank’s purchases and holdings of government bonds: The left-hand graph shows the development of our purchases, and the right-hand graph is a technical illustration of how our holdings might develop if bonds that mature after June 2019 are not reinvested.
However, there is some difference between developments in the United States, where growth has remained strong and unemployment is at its lowest level in almost 50 years, and the euro area, where developments have been more subdued. Wages are now rising increasingly rapidly in countries like Germany and the United States and are helping to push up inflation. But despite these basically good prospects, we also see a substantial number of risks regarding developments abroad, which I will come back to at the end of my speech. For some time now, we have been in an economic boom in Sweden. This in turn is partly due to the expansionary monetary policy. Despite a partial slowdown in growth, output is still above its trend level (see Figure 2). It was striking that GDP fell between the second and third quarters of last year, but we believe most of this has to do with temporary factors, including the fact that household consumption of cars was brought forward to quarter 2 due to amended tax rules, which pushed down car sales in quarter 3. 2 [13]  Figure 2. Economic activity still strong in Sweden High output level 6  High pressure on the labour market 6  GDP gap  4  4  2  2  0  0  -2  -2  -4  -4  -6  -6  -8  01  04  07  10  13  16  19  -8  Note. Left-hand graph.