Given the importance of the bank finance for the non-financial sector, the ECB undertook specific measures targeted at covered bond market, which is an important source of liquidity for banks. To ensure adequate depth and liquidity at secondary markets for government securities and increase the investors’ confidence in 2010 Securities Market Program and later on in 2012 Outright Monetary Transactions were implemented. To support the lending to the private sector a credit easing package was introduced in 2014. To address the risk of prolonged period of low inflation, at the beginning of 2015 the Expanded Asset Purchase Program was adopted. 3 Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Poland, Romania, Serbia, Slovenia. 2  region. In this analysis we will focus on the financial channel, i.e., on the extent to which eased financial conditions due to the ECB’s unprecedented monetary stimulus has affected the financial conditions in the region. First, we will tackle the question on the synchronization between the changes in ECB rate and policy rates in the region, and subsequently the transmission to banks’ lending rate as an indicator for the financing conditions of the private sector. In this context we will also touch upon the issue of the spread between foreign and domestic interest rates as an important factor that influences the room for monetary policy maneuver of the central banks in the region, especially for economies with some form of managed exchange rate regime.
The expansionary fiscal policy is contributing to a strong development of household disposable income in the coming years, providing a basis for higher private consumption as well as increased saving. Exports rise during the forecast period but the increase is relatively modest both on account of the international upswing being tentative initially and because the krona is expected to appreciate. GDP growth is judged to be 1.6 per cent this year and then accelerate to between 2.5 and 3 per cent in the coming years, which as fare as can be judged is somewhat more than the Swedish economy can sustain in the longer run without giving rise to inflationary tensions. With the high resource utilisation, labour costs are judged to rise somewhat more than we foresaw in the December Report. Partly for this reason, domestic inflation in the forecast period is somewhat higher than foreseen earlier. CPI inflation stops at 2.2 per cent one year ahead and 2.4 per cent after two years. The corresponding forecast for inflation’s underlying rate, UND1X, is 2.2 per cent both one and two years ahead. Monetary policy focuses in the first place on the latter rate. In this price forecast, the supply shocks that are now leaving their mark on inflation are judged to drop out of the twelve-month change figures successively during the late spring. Inflation is accordingly expected to approach 2 per cent in the early summer.