Losses likely in the period ahead The fact that the Riksbank’s bond purchases have so far been profitable does not mean that this will always be the case. For example, the ever-lower interest rates have made bond purchases after the spring of 2015 increasingly costly. The Riksbank has now purchased bonds for about SEK 275 billion and several bonds have a long remaining maturity. How expensive it will be to fund this portfolio will therefore depend on the development of the repo rate for a long time to come. According to the current assessments made both by ourselves and others, it is more likely that the bonds that we have purchased in recent months will lead to losses rather than profits for the Riksbank. For example, the yield on ten-year government bonds is now 0.2 per cent. The Riksbank does not make forecasts for the repo rate for more than three years in the future. Even within this limited time horizon, interest rate developments are very uncertain, but let us in any case assume that the repo rate develops in line with the forecast. And let us assume that the repo rate then continues to rise slowly towards 4 per cent (see Chart 5). 14 The average interest rate level up until the bond matures in 2026 will then be 1.2 per cent. Paying on average 1.2 per cent in interest and receiving on average 0.2 per cent in interest represents a loss of 1 per cent a year.
3 At the same time, the problems of falling inflation and inflation expectations also became increasingly apparent in the euro area. This led to the European Central Bank signalling the need for even more expansionary monetary policy in the period ahead, with low interest rates for even longer, supplemented by extensive asset purchases. The increasingly expansionary monetary policy in the euro area also led to monetary policy reactions from several smaller countries on the outside. 3 The significance of the inflation target for the economy is explained in detail in Sveriges Riksbank (2015a) and  Flodén (2015). 2 [12]  Chart 2. Inflation and inflation expectations have picked up 3  3  2  2  1  1  2.3  2.3  2.2  2.2  2.1  2.1  2.0  2.0  1.9  1.9 Inflation expectations  0  0  CPIF excluding energy  1.8  1.8  1.7  1.7  CPIF  -1  -1 10  11  12  13  14  15  16  1.6  1.6 10  11  12  13  14  15  16  Note. Annual percentage change and per cent. The CPIF is the CPI with a fixed mortgage rate. Inflation expectations 5 years ahead according to money market participants. The broken line indicates the time of the monetary policy decision in February 2015.