The Riksbank has deliberately altered its balance sheet in recent years, but there are also changes in our environment that have affected the balance sheet, leading to its current composition. The way the balance sheet looks, combined with the developments in interest rates and yields on the Riksbank’s assets and liabilities also have decisive significance for the Riksbank’s capacity to make a profit. We need to understand the Riksbank’s balance sheet to be able to understand the connections. How has the balance sheet developed over time? And what do we think will happen to it in the future? How does our current balance sheet affect the Riksbank’s possibilities to make a profit? In conclusion, I intend to comment on the current situation with very low international interest rates, and what will happen if (or rather when) interest rates begin to rise. What will this entail for the Riksbank’s possibilities of making a profit? BIS central bankers’ speeches  1  The Riksbank’s measures are reflected in the balance sheet The Riksbank thus does not have the aim to make a profit, but the bank’s possibilities to make profits are nevertheless very important. They are connected to the Riksbank being able to conduct its monetary policy independent of the government and parliament. The Riksbank needs to be financially independent to do this in a credible manner.
Business cycles have also diverged in other ways. The turnaround abroad, which started in the US in 2000, seems to have been related in particular to overinvestment in the business sector, exaggerated expectations concerning future earnings and equity market bubbles that burst. There have been examples of this in Norway too, and the Norwegian economy has over time been influenced by weak external developments. However, other factors seem to have been more instrumental in generating the turnaround in the Norwegian economy. The high rate of economic expansion is now beginning to ebb away as a result of self-regulating mechanisms and a tightening of monetary policy following overheating in the labour market. Wages and costs rose sharply in Norway but more moderately in other countries, even during the period of strong growth in the second half of the 1990s. In the course of the autumn and winter, it became apparent that developments in the global economy are weaker than we and many others had expected. Many central banks have responded by reducing interest rates further. Interest rates in the US, Europe and Japan are unusually low. Interest rates in the US have not been at such a low level since the 1960s. In the last half of the 1990s, when both Japan and Europe experienced sluggish growth, the US functioned as a global growth engine.