But at the September meeting the Executive Board’s assessment was that there would not be any more raises and that the interest rate might need to be cut during 2009. The decision was reached by a narrow majority. Three members of the Executive Board supported the decision, while three were against it, and the Governor’s casting vote was decisive. I was part of the minority who wished to hold the repo rate unchanged at the September meeting and to see a slightly faster reduction in the rate in the future. The main reasons put forward by the majority for raising the interest rate were that inflation had continued to rise and was far above the target, that inflation expectations remained high and that cost pressures had increased. The majority assessment was that it was necessary to raise the repo rate to prevent the increases in energy and food prices from spreading to other areas. The reasons for lowering the interest rate path included the fall in the oil price and other commodity prices over the summer. Another reason was that growth had slowed down more than expected, both in Sweden and abroad. The turmoil in the financial markets was of course also included in the picture. BIS Review 119/2008  5  My own assessment I personally had entered a reservation as early as July against the forecast that it would be necessary to raise the repo rate a couple more times during the autumn.
Covered bonds are therefore good collateral and many other central banks accept them to a greater extent than the Riksbank. In our case, the permitted share was raised from 25 per cent to 75 per cent. This measure meant, to put it simply, that participants in the RIX system, were given the opportunity if necessary to use more collateral as a base for their loans from the Riksbank. Another preventive measure taken by the Riksbank has been to establish, together with other central banks, a swap facility with the US central bank, the Federal Reserve. This agreement entails the Federal Reserve supplying US dollars in exchange Swedish krona if the need should arise. But it should also be pointed out that the Riksbank has a substantial foreign currency reserve. The agreement is not the only means for the Riksbank to obtain loans in US dollars, but it makes it easier for us to take action quickly. Right now, the situation regarding short-term funding in USD has been very strained on many markets. To increase access to liquidity in US dollars and to make the markets function more normally, several central banks, including the Riksbank, have agreed on coordinated actions. The Riksbank has decided to lend dollars to Swedish banks in two auctions during October. The first was held yesterday and amounted to USD 7 billion. A second auction with loans extending over the turn of the year will be held on 22 October and amount to USD 15 billion.