What I just described fits in with the development in Sweden. When the bank crisis came, we had no deposit guarantee system but the government found it necessary instead to issue a general guarantee, sometimes referred to as a blanket guarantee protecting all depositors but also other counterparts to Swedish banks, with the exception of the shareholders. This guarantee was in fact much broader, and potentially more expensive, than a limited deposit guarantee. After the crisis, Sweden has introduced legislation on a system of explicit limited deposit protection. All current deposits up to a certain amount, approximately 35 000 US dollars, are covered. For this, the banks pay a yearly premium, currently 0.10 percent on average of the total amount of deposits. Other parts of the financial sector In my presentation I have focussed on the banks, but an efficient financial sector must also contain a broad range of institutions and markets. They can specialize in certain activities and instruments and improve competition and diversity. They may also reduce the risk concentration on the banking system which implies that the overall economy will be less gravely hit if there ever is a systemic banking crisis. Compare for example Thailand in 1997, where the banks played a dominant role and Russia in the same year where banks played a minor role. Both countries were hit by financial problems but the overall effects on the economy were much worse in Thailand. In Sweden many different types of institutions and markets perform specialized roles alongside with the banks.
Underlying inflation is now estimated to be between 2 percent and 2½ percent, which is one percentage point higher than one year earlier. Chart 9: Norges Bank’s key policy rate projections Saving, investment and spending decisions are influenced by expectations concerning future interest rates. Communication on the future course of monetary policy, including the publication of key policy forecasts, therefore plays an important role. Even though the key policy rate has been kept unchanged, Norges Bank’s forecasts for the key policy rate ahead were revised down through 2013. The downward revision of the key policy rate forecasts primarily reflects lower growth forecasts for the Norwegian economy. There are also prospects that wage growth will be somewhat lower than envisaged earlier. Growth among our trading partners and interest rates abroad have been somewhat lower than projected one year earlier. At the same time, banks’ lending margins are somewhat higher than expected. Chart 10: Inflation and capacity utilisation The analyses in the latest Monetary Policy Report published in March suggested that the key policy rate should be held at today’s level in the period to summer 2015, followed by a  2  BIS central bankers’ speeches  gradual increase. With such a path for the key policy rate, there are prospects that inflation will be slightly below, but close to 2.5 percent throughout the projection period. Capacity utilisation may edge down over the next year and thereafter move up to close to a normal level.