But how can this be done in an environment where interest rates are already very low to start with? It is important to remember that there has long been a trend with falling interest rates around the world – a trend that has nothing to do with monetary policy, but rather concerns ageing populations and other structural factors that have pushed up savings in relation to willingness to invest. In the midst of this the central banks have also had to manage the effects of the financial crisis and a protracted economic slump. Many of them, including the large central banks like the ECB and the Federal Reserve in the United States, have conducted an expansionary monetary policy to support the recovery and bring up inflation, both via very low policy rates and via more unconventional measures such as various asset purchase programmes. Monetary policy in Sweden has also needed to take this into account. So to safeguard the upturn in economic activity and inflation in Sweden and to turn around the negative trend in inflation expectations, we have cut the repo rate down to a negative level, and with effect from the beginning of 2015 we have implemented an asset purchase programme to make our monetary policy even more expansionary. Our assessment is that this monetary policy has by and larger been successful. Market rates have followed our cuts in the repo rate and become negative. And the bond purchases seem to have pushed down interest rates more or less in the way we expected.
Debt-to-income ratio in different income groups 2016 Percentage of disposable income 400  400  350  350  300  300  250  250  200  200  150  150  100  100  50  50  0  0  1  2  3  4  5  6  7  8  9  10  Note. The columns show the median in each decile group. Data for July 2016. The high debt ratio in the lowest income group should be interpreted with a certain amount of caution, as this group includes, among others, households with highly varied incomes, for example households with negative income. Source: The Riksbank  In addition to households having different sizes of assets and liabilities that are affected by interest rates to different degrees, there may also be other dimensions that play a role in how the distribution of income and wealth is affected by a period of very expansionary monetary policy. For instance, one can imagine that household that are used to managing their assets and liabilities have better conditions for safeguarding themselves against or benefitting from the effects of monetary policy on interest rates and asset prices. However, the distributional effects of monetary policy do not come solely through changes in nominal interest rates and asset prices. Ultimately, it is the effect when consideration is given to inflation that is important. And the composition of household wealth is also significant in this context.