It is not possible to avoid an international economic downturn entirely, but it is possible to prevent it from becoming too deep. In monetary policy it is also necessary to take into account what might happen further ahead if one conducts a very expansionary monetary policy over a long period of time. In particular the experiences of the years with low interest rates and rapid international growth prior to the current financial crisis indicate that one may also need to take into account the more longterm consequences of monetary policy and at what pace inflation should be brought back on target. There is also reason to take into account not only the total amount of spare resources in the economy, but also the composition of those resources. For an export-dependent country such as Sweden it is important, for instance, to take into account to what extent a large fall in exports could be replaced by other parts of demand through expansionary monetary policy and at what rate this could be done without inflation problems arising. Correspondingly, one may need to take into account the extent to which the labour supply will decline as a result of the depth and length of the recession when assessing what consequences a coming recovery may have for wage formation. The conclusion I draw from this is that it is important not to overestimate the available resources in the economy over the coming years.
When interest rates are low or negative, it is relatively attractive to hold cash (as opposed to bank deposits, for example) as a store of value. The increase in interest rates since June has meant that there is once again less of an incentive to hold cash. Against this backdrop, the value of banknotes in circulation fell by around CHF 10 billion to CHF 81 billion between June and October. Returns of the 1000-franc notes in particular were substantial, totalling CHF 7.7 billion. We expect this decline to continue. Nevertheless, demand for cash as a store of value is likely to persist. Companies and households consider such a safety net to be important. Page 1/2  Berne, 15 December 2022 Martin Schlegel  News conference  Of course, cash is not only used to store value, but also to make payments. Small denominations in particular play an important role here. The decline in banknotes in circulation observed since June is not related to the use of cash for payment purposes. The rise in interest rates has had no impact on the small denominations (cf. chart 2). While the growth rate for the small denominations dipped during the pandemic, demand has rebounded since early 2022 and has stabilised. Despite the general increase in the demand for cash, the use of cash for payments has declined in recent years. We are currently investigating changes in the use of cash as a payment method in our 2022 ‘Survey on payment methods’.