It is not surprising that these questions arise. But if they are to be discussed, it is important to separate the two tasks the Riksdag (the Swedish parliament) has given us – monetary policy and financial stability. This may not be so easy, as the areas in many ways affect one another. However, I shall try to make things a little clearer. Two different tasks… What is happening right now is important, both with regard to financial stability and monetary policy. The financial turbulence has also been included in our analyses of both areas, ever since the problems connected to the mortgage market in the United States became apparent last summer. However the perspectives are different. The stability perspective concerns how the banks, the payment system and the financial system in general are affected by the financial crisis. The monetary policy perspective concerns how inflation and developments in production and employment may be affected. … which are in many ways linked As I recently mentioned, our two fields of activity are closely linked. The financial turbulence that has spread around the world to a large extent has its roots in the problems in the United States, linked to financial stability. This has led to extensive losses in the bank system in the rest of the world, to considerable uncertainty and poorer functioning in the financial markets. This is of course important to economic activity. However, economic activity in its turn affects factors that are important to financial stability.
A large part of the collateral the banks pledge for these loans will probably be comprised of covered mortgage bonds. The measures should therefore also have a positive effect on the functioning of the mortgage market. Together with the measures taken by other central banks, this should lead to better liquidity in the financial markets globally. A further measure is that the Riksbank as recently as today decided to establish a loan facility in Swedish krona to increase access to loans of longer duration. There have thus been disruptions in the financial markets, but the Riksbank, other government agencies and central banks have taken action to improve the functioning of the markets. We will of course continue to follow developments very closely. We are constantly updating our analyses and we are prepared to take action if necessary. In addition, as I have already mentioned, we have close contacts with the banks, market participants, other government agencies and our central bank colleagues in other countries. Monetary policy When the Executive Board met for our most recent monetary policy meeting on 3 September, the decision was to raise the repo rate by 0.25 percentage points to 4.75 per cent. However, the forecast for how the repo rate would develop in future was lowered in relation to the interest rate path that had been presented in July. The July forecasts contained a fairly high probability for a further two raises during the autumn.