Risks will, I should be clear, persist from the international environment and, in particular, the pattern of international saving. If the Asian economies were to continue to save at an extraordinary rate but the Western economies increase their saving, as over time we must in order to repair national and sectoral balance sheets, longer-term risk-free rates could again fall in order to bring about the counterpart expansion in investment. And, although it may seem far-fetched right now, that could give an upward impetus to asset prices over the medium-term. We would need to be careful not to mistake any such future developments for a miracle improvement in underlying economic and financial conditions. Indeed, internationally, we need to learn lessons about brewing risks from medium-term imbalances. BIS Review 71/2009  1  The Bank’s policy response, and credit markets Alongside the Government’s actions to underpin the capital resources and funding of the banking system, the Bank’s policy actions have been designed to assist recovery in credit flows and nominal demand. The big downside risks to the outlook have warranted a substantial monetary stimulus, which the MPC has provided by bringing Bank Rate down to nearly zero, and by injecting a substantial amount of money directly into the economy. Speaking of course only for myself, I have so far preferred that approach to one where we would instead commit to keep Bank Rate low for a specified extended period.
4/6  Growth in the swedish economy continuing to strengthen For the Swedish economy, too, it was concluded in the Inflation Report that the economic upswing appeared to have gained impetus again after the slowdown at the start of the year. Compared with the previous assessment, GDP growth and resource utilisation were forecast to be somewhat higher in the years ahead, largely owing to more expansionary economic policy. All in all, the assessment was that growth would be relatively firm in the Swedish economy in the coming years. The recent years’ high productivity growth has partly laid the foundation for this development. Companies have been able to boost output with their present workforces, which has improved their cost situation and held back price increases in the economy. The low inflation rate has enabled monetary policy to be expansionary for a comparatively long period. In addition, the high productivity and relatively good profitability is anticipated to create scope for comparatively favourable wage growth in the period ahead. This means that there are good prospects for firm growth in domestic demand over the coming years. Expansionary fiscal policy will also help to boost domestic demand, while more robust growth in Swedish export markets will contribute to stronger exports. New information broadly supports the picture of a continued improvement in economic activity in Sweden. The National Institute of Economic Research’s (NIER) latest business tendency survey provides a relatively bright picture of economic conditions in most of the surveyed industries.