Both the Riksbank and the market have often made substantial overestimates of the repo rate in their forecasts (see Figure 5). 12 Although the market's forecasts were better than the Riksbank's during the period 2011–2013, the pattern is essentially the same – substantial overestimates and inaccurate forecasts. A brief remark is in order here. Sometimes one gets the impression from the debate that it is only the Riksbank that has produced inaccurate repo rate forecasts, while most analysts, including the market, have been quite successful. Apparently, this is not the case. One may perhaps object that the market may not produce forecasts of its own, but merely assumes that the Riksbank will follow its reporate path. But the experiences of the period 2011–2013 indicate that this is not really the case. I think this is a useful picture to bear in mind. If one wants to implement a makeup strategy in a situation where the repo rate is at the lower bound, it is probably necessary to use a more convincing approach than Delphic forward guidance. The alternative to Delphic forward guidance is called Odyssean forward guidance. This name is also taken from Greek mythology and refers to Odysseus, who had his men tie him to the mast so he would not be tempted by the song of the Sirens and steer his ship towards the cliffs.
Since last November, the three-month Libor had been held at the desired level of 0.25%. However, from mid-May it began sinking rapidly and is currently well below that level. The fall in the rate is a sign that the banking system is currently holding a very large amount of liquidity. My colleague, Jean-Pierre Danthine, will talk about this in greater detail. Interest rates on the capital market have also fallen. In June, yields on 10-year Swiss Confederation bonds fell to a record level. The low capital market interest rates reflect a higher demand for Swiss government bonds. In addition, long-term inflation expectations continue to be firmly anchored. Private companies are also benefiting from low interest rates on capital markets. Credit risk premia have fallen further and rates of interest on bank loans are also at a very low level. Since the last monetary policy assessment, the Swiss franc has appreciated against the euro. It has simultaneously depreciated against the US dollar. As a result, the trade-weighted external value of the Swiss franc has only slightly increased. The expansionary monetary policy is also reflected in the monetary aggregates. Thus, the monetary base rose to a record CHF 128.6 billion in May, and growth of the monetary aggregates is continuing at a high level. For example, M2 was growing at 10.2% in May and M3 at 7.1%. Credit growth also increased further. After slowing to 2.7% in September 2009, the rate of growth increased to 4.1% in April.