Without these measures we would probably have faced a financial meltdown. One sign that the crisis is no longer as acute is that what are known as TED spreads have fallen in Sweden, as well as the United States and the euro area. The TED spread is the difference between a three-month interbank rate and a three-month treasury bill rate. The spreads are now back at around the levels prevailing immediately prior to the worsening of the crisis in autumn 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. Moreover, the liquidity injection from the central banks does not solve the banks’ capital problems. For this reason it is not surprising that the international discussion is currently aimed more at solvency than liquidity. It would be very much appreciated if many countries could begin to distinguish bad banks from good ones in an effective and transparent manner. In Sweden, too, we have 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. This has largely been financed by means of swap agreements with the Federal Reserve in the United States.
Medium to longer-term inflation expectations remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term. Cross-checking the outcome of the economic analysis with that of the monetary analysis confirms the assessment of low inflationary pressure over the medium term, as money and credit growth continues to slow down. Against this background, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. As the transmission of monetary policy works with lags, we expect that our policy action will progressively feed through to the economy. Hence, with all the measures we have taken, monetary policy has been supporting the availability of liquidity and the recovery of the euro  2  BIS Review 136/2009  area economy. Looking ahead, and taking into account the improved conditions in financial markets, not all our liquidity measures will be needed to the same extent as in the past. Accordingly, the Governing Council will make sure that the extraordinary liquidity measures taken are phased out in a timely and gradual fashion and that the liquidity provided is absorbed in order to counter effectively any threat to price stability over the medium to longer term. By so doing, the Governing Council will continue to ensure a firm anchoring of mediumterm inflation expectations. Such anchoring is indispensable to supporting sustainable growth and employment and contributing to financial stability.