But I also pointed out that we must be prepared to reconsider the direction of our monetary policy, if developments abroad turn out to be much weaker than we have expected. (Figure: Repo rate). 6  BIS Review 109/2010  Back in April we were expecting to need to raise the repo rate either in July or September. We later had to make a substantial upward revision to the forecast for GDP growth this year, at the same time as the forecasts for inflation and wages remained largely unchanged. This pointed towards raising the repo rate in July rather than waiting until September. But, despite the fact that the forecast for GDP growth in 2010 had to be revised up substantially, we were nevertheless expecting resource utilisation to remain low for most of the forecast period, and inflationary pressures to be modest. This pointed towards the repo rate needing to be held at a lower rate than normal over the coming period. However, our joint assessment was that we ought to ease up on the accelerator and gradually raise the repo rate towards a more normal level, as resource utilisation increases. I also felt it was reasonable that we in Sweden should begin to raise interest rates sooner than the United States and the euro area. This was because we were forecasting a higher GDP growth and a slightly higher inflation rate in Sweden, particularly in comparison with the euro area, in June.
2  For the banks to manage the stress test their Tier 1 capital ratio, that is, their Tier 1 capital in relation to their risk-weighted liabilities, must not fall below 6 per cent. In the stress test the major Swedish banks were calculated to have Tier 1 capital ratios of 8.9–10.3 at the end of the test period. 4  BIS Review 109/2010  Strong GDP growth The Riksbank’s Monetary Policy Report from July forecasts relatively high GDP growth in the coming years: that Swedish GDP will grow by 3.8 per cent this year, and then by on average just over 3 per cent a year in 2011 and 2012. (Figure: GDP growth). We could also note that the first quarter of the year had been better than expected. It is particularly pleasing that the upturn was on a broad front – all of the components of GDP contributed to the upturn. Moreover, the Riksbank also saw good opportunities for a continuing recovery. Domestic demand is being maintained by a continued expansionary economic policy, combined with an optimistic view of the future in both the household and corporate sectors. In addition, growth abroad is expected to rise during the forecast period. This will contribute to an increased demand for Swedish export products, which in turn will benefit business sector investment as resource utilisation rises. Our picture of a recovery in the Swedish economy is also supported by new statistics published after the Monetary Policy Report.