Central banks' balance sheet totals, percentage of GDP 30  30 The Riksbank  25  25  ECB Federal reserve  20  20  15  15  10  10  5  5  0 Jan-07  0 Jul-07  Jan-08  Jul-08  Jan-09  Jul-09  Sources: Bureau of Economic Analysis, Eurostat, Statistics Sweden and the respective central banks  As we have discussed earlier, the Riksbank has also implemented unconventional measures – measures in addition to the policy we would probably have conducted under more normal circumstances. The effects of these measures are in many cases similar, which means that it is difficult to compartmentalise them. However, even if the boundaries are not razor-sharp, it is possible to divide them up according to their basic purposes. There are measures which are explicit monetary policy measures with the aim of stimulating demand in the economy further – since the repo rate is close to zero, the possibilities to use the “traditional” interest rate tool are limited. There are also measures that have been implemented to safeguard financial stability. …to attain the inflation target... To attain the inflation target, it has been necessary to make use of new tools to get the financial markets functioning better, to increase the access to loans and to try to bring down various interest rates and risk premiums that have counteracted monetary policy.
One fundamental factor is that households endeavour to make realistic calculations of how much interest expenditure and amortisation they can manage in the long run, not only when interest rates are as low as they are now. Something that can be said to be the flip side of the same coin is that the banks make responsible credit assessments when lending money. If these two basic components are in place, there is a good chance of avoiding an out-ofcontrol situation further ahead, although as I said before there are many other factors that may be important. Finansinspektionen (the Swedish Financial Supervisory Authority) carries  4  BIS Review 138/2009  out very important work here in that they monitor developments in the banks and credit institutions and are prepared to take action if they consider it necessary. Underlying inflation stable around target of 2 per cent The impact of monetary policy on households’ living costs is something that creates large fluctuations in CPI inflation during the forecast period (Figure 5). The fact that the repo rate has been cut heavily over the past year has contributed to a rapid fall in CPI inflation, as changes in households’ mortgage expenditure are included in this index. With effect from autumn 2010, however, the repo rate is expected to rise relatively quickly, which will correspondingly mean that CPI inflation will be close to 4 per cent at the beginning of 2012.