Of course, these measures will eventually have positive effects on inflation in Sweden as they provide welcome stimulus for an important Swedish export market. But, by weakening the euro, the ECB’s measures risked exerting price pressure on a significant portion of Swedish imports over the short term. In addition, the price of oil had fallen sharply in 2014 and continued to fall in 2015. The international development of the price of oil directly influences inflation in Sweden via the price of fuel oil and, not least, the price of petrol. Over time, it can also have effects on other prices, as it affects companies’ energy and transportation costs. It is true that, in normal cases, a fall in the price of oil has a brief effect on the actual inflation figures. But as the price of petrol in particular is so very visible for so many people, it may have a disproportionately high impact on how inflation is perceived and thereby possibly also on inflation expectations. 2  See, for example Andersson, B., Corbo, V. and Löf, M., “Why has inflation been so low?”, Sveriges Riksbank Economic Review 2015:3, Sveriges Riksbank. 3  “Sweden needs its inflation target”, published 13 October 2015. BIS central bankers’ speeches  3  We have also had a year characterised by a large degree of uncertainty over international developments in general. Greece’s membership of the single currency and possibly, therefore, the entire European monetary union was, at moments, on the ropes.
But would making the repo rate negative and quite simply forcing the banks – and, ultimately, perhaps their customers – to pay to keep money in an account really have the same impact on final interest rates for households and companies and, if so, could it be implemented without causing problems elsewhere in the system? One objection towards negative interest rates is that people will choose the alternative of keeping cash in their mattresses. As this would be troublesome and not entirely risk-free, it can be imagined that most people would want to hold off stuffing their mattresses with cash as long as interest rates stay only slightly negative, but it is, of course, difficult to gain clarity as to exactly where such a boundary would lie. If the banks were unwilling to introduce negative deposit rates, would they then attempt to maintain their earnings by not cutting their lending rates either, in the eventuality that the repo rate was cut to below zero per cent? There are some international experiences, albeit short-lived, of  4  BIS central bankers’ speeches  negative interest rates that can be looked at – from the euro area, Denmark and Switzerland – but how would the Swedish system react? Purchasing government bonds? Another measure with the potential to push interest rates down and counteract the excessively rapid appreciation of the krona was the purchasing of government bonds. There were significantly more comprehensive historical and international experiences of this than there were of negative interest rates.