In November 1999 we raised the repo rate and during early 2000 a similar assessment was made. During autumn 2000 we saw ahead of us a situation with a stable and strong upturn in economic activity that would gradually lead to a high level of resource utilisation and rising inflation. At the beginning of 2001 we received a number of statistics that indicated a slowdown, particularly in the USA. The Federal Reserve surprised everyone with an interest rate cut in January, in between two ordinary monetary policy meetings. The slowdown then spread. The Riksbank and most other forecasters began to revise down their growth forecasts for Sweden and internationally. The share and IT bubble burst and this together with rising oil prices and higher real interest rates during 1999 and 2000, led to a synchronous downturn in economic activity around the world. During the course of 2001, we made several major downward revisions to our forecasts for international growth. The economic downturn is assumed to have had a subduing effect on Swedish inflation via both direct and indirect channels. In mid-2001 the decline in the real economy had on the whole become more marked than expected. However, the development in prices deviated sharply from the forecasts made by the Riksbank and other analysts. When inflation surprisingly rose considerably during spring 2001, the assessment was made that this was largely due to factors of a transitory nature, partly caused by disturbances on the supply side.
However, these numbers are estimates given that almost all of the repo transactions are conducted over the counter. See also IMF (2010), Global Financial Stability Report, October 2010. 2  BIS central bankers’ speeches  there is no new information but only the application of the existing and published criteria. Compared to many other central banks, the definition of eligible collateral is unusually open in the sense that the SNB is rare among central banks in accepting securities denominated in foreign currencies and not only in its home currency, the Swiss franc. The quid-pro-quo of this multi-currency policy is that securities eligible for SNB repo transactions must satisfy stringent quality requirements: these requirements concern their credit ratings and liquidity properties. This policy is coherent – open but strict! – and it has substantial advantages. First, no initial margin or haircut is applied during standardised repo transactions, making the system more capital efficient.8 Second, it allows a broad range of financial institutions to participate, including many international banks. Third, it creates incentives for banks to hold high-quality, liquid assets in their balance sheets. Finally, as already suggested, this highly credible collateral policy has resulted in SNB eligible collateral becoming the standard for the secured interbank money market in Swiss francs. This, in turn, has made an essential contribution to creating a robust secured interbank market and thereby keeping interbank credit lines open at all times during the crisis. II.