As growth prospects have weakened we have cut the repo rate over the last 12 months in order to attain the inflation target and support economic activity. However, a lower repo rate also increases the risk associated with household indebtedness. The decisions to cut the repo-rate have therefore not been self-evident. Low repo rate in Sweden over the last 12 months In connection with the financial crisis the repo rate was lowered all the way to 0.25 per cent, where it remained for almost a year - from mid-2009 to mid-2010. During the strong recovery that followed the financial crisis we moved towards a normalisation of monetary policy, and during the autumn of 2011 the repo rate reached 2 per cent. However, the financial crisis then became a debt crisis in Europe, which has undermined economic prospects once again. We therefore had to call a halt to the normalisation process. This year, the Riksbank has instead cut the repo rate in a number of stages to stimulate the Swedish economy and prevent the rate of inflation becoming too low. Historically speaking, the repo rate is now very low (see Figure 1). Let me now go back a little and describe how we ended up in the position we are now in with regard to monetary policy. I also intend to take up some of the important lessons learned from the international financial and debt crisis of recent years. The financial crisis became a debt crisis in Europe… The global financial crisis began about four years ago.
Economic Tendency Survey of the National Institute of Economic Research Index, average = 100, standard deviation = 10 120  120  110  110  100  100  90  90  80  80  The Economic Tendency Indicator Mean +/- one standard deviation  70  70 00  02  04  06  08  10  12  Source: National Institute of Economic Research  10  BIS central bankers’ speeches  Figure 9. Labour force, employment and unemployment 1000s and percentage of the labour force, 15-74 age group 5 200  12  Labour force (left) Employed (left) Unemployment (right)  5 000  10  4 800  8  4 600  6  4 400  4  4 200  2  4 000  0 01  03  05  07  11  09  Source: Statistics Sweden  Figure 10. Repo rate, mortgage rates for households and bank interest rates for companies Per cent 7  7 Average bank interest rate for companies Average mortgage rate  6  6  Repo rate  5  5  4  4  3  3  2  2  1  1  0  0 06  07  08  09  10  11  12  Note. Per cent, monthly averages.