Monetary Policy Report 2008:3

Repo rate cut to 3.75 per cent Further cuts over the coming six months To alleviate the effects of the financial crisis on economic activity and to attain the inflation target of two per cent

Repo rate cut Financial crisis Credit crunch Deeper economic downturn Lower inflationary pressures Other measures also necessary to improve the functioning of the markets

The financial crisis… …affects for instance Interest rates Stock markets Commodity prices Exchange rates

Interbank rate and repo rate Per cent Three-month interbank rate Sources: Reuters EcoWin and the Riksbank

Mortgage rates have risen more than the repo rate Per cent Interbank rate Mortgages – SBAB Mortgages - average Refers to three-month mortgage rate from SBAB, three-month interbank rate and monthly average for three-month mortgage rate for mortgage institutions’ new lending. Sources: Reuters EcoWin, SBAB, Statistics Sweden and the Riksbank

Falling stock markets Index, 1999-01-04=100 Euro area (EuroStoxx) Sweden (OMXS) USA (S&P 500) Source: Reuters EcoWin

Lower oil price Brent crude, USD per barrel Oil price, outcome Spot price on 22 October 2008 Futures, MPU September 2008 Futures, average up to 16 October 2008 Note. Futures prices are calculated as a 15-day average. Sources: Intercontinental Exchange and the Riksbank

Falling commodity prices USD, index (2000 = 100) Food Metals Other agricultural products Total Source: The Economist

Weaker krona Trade-weighted exchange rate (TCW), index, 1992-11-18=100 TCW forecast MPR 2008:3 TCW forecast MPU September 2008 Source: The Riksbank Note. Broken line refers to the Riksbank’s forecast (quarterly data).

Deeper economic downturn Lower capital value More difficult to borrow Lower demand from abroad Increased uncertainty

Sources: The IMF, Statistics Sweden and the Riksbank Lower growth abroad and in Sweden Annual percentage change, calendar-adjusted data Sweden World Note. Broken line and bar represents the Riksbank’s forecast. Sources: The IMF, Statistics Sweden and the Riksbank

Pessimism among households… Net figures Swedish economy Own finances Labour market Source: National Institute of Economic Research

Sources: National Institute of Economic Research and Swedbank … and in the business sector Seasonally-adjusted index and net figures, manufacturing industry Purchasing managers’ index (left scale) NIER’s confidence indicators (right scale) Note. Index over 50 is growth, under 50 is decline. Sources: National Institute of Economic Research and Swedbank

Lower GDP growth Quarterly changes in per cent calculated as an annual rate, seasonally-adjusted data MPR 2008:2 MPU September 2008 MPR 2008:3 Note. Broken lines represent the Riksbank’s forecasts. Sources: Statistics Sweden and the Riksbank

Lower employment Thousands, seasonally-adjusted data, 3-month moving average Newly-registered job vacancies Unfilled job vacancies Redundancy notices (right scale) Source: Swedish Employment Service Note. Redundancy notices include outcomes to 20 October.

Higher unemployment Per cent of work force, seasonally-adjusted data Unemployment 16-64 years Unemployment 15-74 years MPR 2008:3 MPU September 2008 Note. Broken lines represent the Riksbank’s forecasts Sources: Statistics Sweden and the Riksbank

Lower inflation CPI, Annual percentage change MPR 2008:3 MPU September 2008 Note. Broken lines refer to the Riksbank’s forecasts Sources: Statistics Sweden and the Riksbank

Lower repo rate Per cent, quarterly average MPR October 2008 MPU September 2008 Note. Broken lines represent the Riksbank’s forecasts Source: The Riksbank

Uncertainty in the forecasts Global economic activity and financial crisis worsen Higher inflationary pressures Weaker krona

Repo rate a forecast – not a promise Per cent, quarterly averages Source: The Riksbank

Measures for the financial system Loans (against collateral) in SEK and USD Changed collateral requirements Liquidity assistance to Kaupthing

Riksbank’s loans Offered Implemented SEK SEK 280 billion SEK 180 billion (Further SEK 80 billion Monday 27/10) USD USD 27 billion USD 27 billion (approx. SEK 130 billion) Assumption: 1 USD=7.5 SEK

Measures taken by the Government sector The Riksbank SEK 380 billion Swedish National Debt Office SEK 100 billion (Can be compared with outstanding stock of covered mortgage bonds: approx. SEK 1 000 billion at end of August 2008) Government Finansinspektionen (Swedish Financial Supervisory Authority)

Repo rate a forecast – not a promise Per cent, quarterly averages Source: The Riksbank