3  The Riksbank’s long-run target fulfilment is discussed by Andersson, Björn, Stefan Palmqvist and Pär Österholm (2012), “The Riksbank’s attainment of its inflation target over a longer period of time”, Economic Commentary no. 4, 2012, Sveriges Riksbank. 4  See, for instance, Heikensten, Lars, (1999), “The Riksbank’s inflation target – clarifications and evaluation”, Sveriges Riksbank Quarterly Review, 1999:1, pp. 5–17. 5  The reason why the inflation target did not begin to apply from January 1993 was that it was realised that the large depreciation in connection with letting the krona float would result in a one-off increase in the price of imported products and thus a relatively large, but temporary, increase in the inflation rate. BIS central bankers’ speeches  3  Favourable developments have held inflation back Of course, it is also important to analyse why inflation has undershot the target, even after these direct effects of interest rate changes have been excluded. My view is that growth in the economy has often been surprisingly high during the periods when inflation has been unexpectedly low. The combination of low inflation and high growth indicates that the economy was affected by positive changes on the supply side. The Riksbank and other forecasters have, for instance, often been surprised by the high productivity growth in the Swedish economy. As I see it, it is thus largely unforeseen, but beneficial developments that have kept inflation down.
Among the currencies (graph 1), the US dollar and the euro predominate with shares of 42% and 46% respectively. The maturities of the investments extend over the entire interest rate curve, with the average maturity being around five years. In the debtor categories, government paper predominates, accounting for a share of more than 50%. The rest comprises claims against international organisations and banks or bank-like borrowers with an above-average rating. Aside from these traditional bonds, US mortgage-backed securities were introduced in 2000, a new investment category which represents an ideal addition to the portfolio. In the context of the primary requirements specific to a central bank – extremely high liquidity, investment focus on the major currencies US dollar and euro, a mainly passive investment style – risk/return considerations are of prime concern. The goal is to achieve the highest possible return by means of all available concepts and techniques of modern asset management with adequate risk control. The investment strategy is developed by inhouse investment specialists. It is mostly implemented internally by a team of eight portfolio managers. We resort to external asset managers for the investment of approximately Sfr 4 billion (global bonds and mortgage-backed securities). Our entire investment activity is systematically monitored by risk specialists. In 2001, a yield of 5.2% was achieved on foreign exchange reserves. The average yield in the past four years was 6.3%.