Figure 7 shows that the real repo rate is expected to be negative in 2012–2013; that is for a substantial part of the forecast period. If this proves to be the case, won’t there then be a risk of monetary policy being too expansionary? Won’t we perhaps risk overheating, a too high rate of inflation or an unsustainable development of household debt? This is of course not impossible, but at present I do not think that it is very likely. To explain how I have reached this conclusion I would now like to briefly summarise how I view some of the risks associated with a very low real interest rate. 8  BIS central bankers’ speeches  Figure 7. Low real repo rate for some time to come Real repo rate, per cent, quarterly mean values 3  3 December February  2  2  1  1  0  0  -1  -1  -2  -2 06  08  10  12  14  Note. The real repo rate is calculated as a mean value of the Riksbank’s repo rate forecast for the year ahead minus the inflation forecast (CPIF) for the corresponding period. Source: The Riksbank  Overheating – not a risk at present The first risk thus relates to resource utilisation in the economy and the risk of overheating. As I have already said, weak economic development abroad is having a significant impact on the Swedish economy.
This applies, for example, to the need for consolidation and which strategy is best for finding solutions to the debt crisis in the euro area as quickly as possible. The question of what role the central banks should play in counteracting an excessive expansion of credit and indebtedness is also often debated, and the members of the Executive Board of the Riksbank also have different opinions about this. I don’t find this strange at all, on the contrary it is entirely natural. Hopefully, this debate will contribute to constructive solutions going forward. Thank you. BIS central bankers’ speeches  13