A cautious combination of a negative repo rate and bond purchases So how have we chosen to act, and what have the results been, so far? Up to this point, we have kept to changes to the repo rate and repo rate path, and purchases of government bonds. As it has not been completely certain how these would function in practice, there has been reason to proceed cautiously. We have combined several measures over the past year to make the combined effect sufficiently great. Over a number of stages, we have cut the repo rate and/or the repo rate path, at the same time as we have announced and initiated bond purchases in amounts that have been increased in several stages (see Figure 4 and Figure 5). In addition, in our communication, we have emphasised our preparedness, if necessary, to also rapidly increase monetary policy stimulus between the ordinary monetary policy meetings held every second month. In March 2015, we did exactly this – we took a decision on new monetary policy stimulus between two ordinary meetings. The repo rate cuts have largely worked As regards the repo rate cuts, so far we have been able to observe that lending rates followed to a normal extent, while deposit rates have stopped at zero for everybody except some larger companies.
However, speaking for myself, I have always seen the repo rate path as a component of our ambition to be transparent as it shows which repo rate we include in our forecasts. And we always emphasise that the repo rate path itself is a forecast and not a promise. One important source of the difficulties that Goodfriend and King point out is the unclear allocation of roles, responsibilities and instruments for managing the work of financial stability and macroprudential policy in Sweden. As I have already mentioned, I consider sorting this matter out to be a matter of great urgency, considering that Sweden has one of Europe’s largest banking systems in relation to GDP. 6  Goodfriend, M. and King, M., “An assessment of Swedish monetary policy 2010–2015”, Riksdag Committee on Finance, Sveriges Riksdag, 2016. 7  “Time to improve the inflation target?”, published 3 December 2015. BIS central bankers’ speeches  7  This spring, Goodfriend and King’s assessment will provide an excellent basis for the discussion of monetary policy and the issues that a modern central bank must manage. These unusual times are placing great demands on both monetary policy and macroprudential policy. It is important that we are able to meet these challenges in the right way. 8  BIS central bankers’ speeches  Figure 1. Inflation targeting has made inflation lower, more stable and more predictable. Note. Annual percentage change. Sources: Statistics Sweden and the Riksbank  Figure 2. Average mortgage rate and corporate rate, and repo rate  Note.