Now, the situation has rather been the opposite: comprehensive lending from the Riksbank, but very limited loan losses on the home market for the banks. How can this be explained? Well – as a reflection of the nature of the crisis. Back then, in the early 1990s, the banks had suffered  2  For example, in the euro area, the price index HICP measures inflation without the effects of changes in mortgage interest expenditure. 2  BIS central bankers’ speeches  loan losses in the commercial property sector, which impacted on profitability in the banking sector and led to a degree of restructuring aimed at maintaining capital adequacy; it was a solvency crisis, rather than a liquidity crisis. This time, in conjunction with the financial crisis, an acute shortage of liquidity instead arose in the banks when the functioning of the capital markets became impaired. A further sign that the financial crisis is behind us is that the Riksbank has now wound up all of the extraordinary measures adopted during the crisis. It was not entirely easy to understand the development of the financial crisis while it was unfolding. Today, however, the view is much clearer. This brings us to the question of where we are today. Where are we now? Strong recovery after the crisis The Swedish economy has recovered very strongly from the financial crisis. The growth of GDP in Sweden is very high from both a historical and an international perspective.
All in all, the monetary policy stance suggests a gradual increase of the repo rate towards more normal levels (see Slide 12). This is a precondition for the balanced development of the Swedish economy. As I mentioned two days ago, housing prices and debts among households have increased heavily for a longer time. The rate of increase of household debts has far exceeded the rate of increase of incomes. If this development continues, imbalances may arise in the Swedish economy over the long term. Consequently, in this regards, the normalisation of the repo rate level may also contribute to promoting a stable economic development in the future. Even if the development of Sweden’s economy is favourable, it is naturally not risk-free. What risks can we see at present? Firstly, the krona may appreciate more than we had expected. The assessment we have made is that the krona, to a significant extent, already reflects the high growth rate of GDP and the strong state of public finances, for example. However, I would like to point out that forecasts of exchange rates are always associated with significant uncertainty. It cannot be ruled out that the favourable development of the Swedish economy has led many investors to reappraise their view of investing money in Sweden. So could an excessively strong exchange rate form a problem? Yes, it may form a “problem” in so far as demand for Swedish exports will decrease and inflation may not increase in line with expectations, as imported goods become cheaper.