As a small, open economy, Sweden must in principle accept the international real interest rate as a given. Monetary policy is not able to affect the real interest rate to any great extent in the longer run, but it affects inflation and inflation expectations. In recent years, the IMF and other forecasters have revised down their forecasts for GDP on several occasions. If one looks at real interest rates, these began to fall even before the financial crisis and real interest rates have also fallen during periods of higher growth. Opinions differ with regard to the causes of this slowdown. The more pessimistic line talk about secular stagnation, where savings have increased and willingness to invest has declined as a result, for instance, of the composition of the population, of growing income gaps and weak technological innovations. This has in turn pushed down the interest rate level compatible with normal resource utilisation. The other more optimistic line say that remaining effects from the global financial crisis, such as deleveraging and increased political uncertainty, explain the slowdown but that these effects are transitory. 1  1  See Deputy Governor Henry Ohlsson’s speech on 18 March 2016 “Decision today, consequences far into the future”, for a longer review. BIS central bankers’ speeches  1  Lower real interest rates and inflation But it is not merely real interest rates that have fallen. In recent years, inflation has also shown a downward trend.
In an acute crisis situation, the availability of sufficient liquidity, together with a strong equity position, is absolutely crucial. Fourth and finally, I would like to mention that, in the Swiss franc money market, repo business via the Swiss Value Chain has proved to be a crisis-resistant source of liquidity, thanks to the consistent minimisation of risks. The repo market allows participants to undertake rapid refinancing in the interbank market, independent of credit limits, thereby making a major contribution to the stability of the financial system. That is why it is important for the SNB that all Swiss and foreign banks operating in the Swiss franc money market join the Swiss repo system. BIS Review 150/2007  3  4  BIS Review 150/2007  BIS Review 150/2007  5