1. The current economic situation Jönköping March 2009 Deputy Governor Svante Öberg

2. Summary The financial turmoil worsened last autumn and has developed into a global financial crisis. International developments will be weak this year and there is a considerable risk that economic activity will be weak next year, too. GDP growth in Sweden will be negative this year and inflation will fall. The Riksbank has cut the interest rate to 1 per cent and may need to cut it further.

3. Contents Financial market International outlook Sweden Monetary policy

4. TED spreads Basis points Note. Spread between 3-month interbank rate and treasury bill rate.

5. Causes of the crisis Global imbalances Expansionary monetary policy Credit rating agencies Supervision Regulatory frameworks

6. Management of the crisis Liquidity supplied by central banks ELA to individual institutions Interest rate cuts Guarantees and capital injections Expansionary fiscal policy Despite these measures the financial markets are still functioning much less efficiently than normal

7. Policy rate Per cent Source: Reuters EcoWin

8. The Riksbank’s measures Loans (against collateral) in SEK and USD Change in collateral requirements Special liquidity assistance Commercial paper Swap agreement Repo rate has been cut

9. The Riksbank’s balance sheet

10. Contents Financial market International outlook Sweden Monetary policy

11. Purchasing managers index, manufacturing Net figures, seasonally adjusted data Source: NTC Economics Ltd, ISM and Swedbank

12. Stock market developments Index, 4 January 1999 = 100 Source: Reuters Ecowin

13. GDP Annual percentage change Sources: the IMF, the OECD and the Riksbank * Note. The IMF’s forecast update 28 January 2009.

14. Oil price Brent crude, USD per barrel Sources: Intercontinental Exchange and the Riksbank

15. Commodity prices USD, index, year 2000=100 Source: The Economist

16. Inflation Annual percentage change Source: the Riksbank

17. Growth picks up again in 2010 Forceful measures to stabilise the financial markets Expansionary fiscal and monetary policy Low inflation

18. Risk of poorer developments Reinhart and Rogoff House prices and share prices Production and employment Public finances Risk that 2010 will also be a year of very weak growth in the world economy

19. Real house prices, USA Index 1953=100 Sources: S&P Case-Shiller (1986-), OFHEO (-1986), U.S. Bureau of Labor Statistics

20. Contents Financial market International outlook Sweden Monetary policy

21. Exports falling Annual percentage change, seasonally-adjusted data Note. Three-month moving average, exports of goods in fixed prices calculated by the Riksbank. Sources: Statistics Sweden and the Riksbank

22. Confidence indicator and PMI for manufacturing sector Net figures, seasonally adjusted data Sources: National Institute of Economic Research and Swedbank

23. GDP Annual percentage change, calendar-adjusted data Sources: Eurostat, Statistics Sweden and the Riksbank

24. GDP forecast Per cent, quarterly averages Källa: Riksbanken Note. Uncertainty band from forecast in September 2008. Broken lines represent the Riksbank’s forecasts.

25. Number of persons employed 1000s, seasonally-adjusted data Sources: Statistics Sweden and the Riksbank Note. Broken lines represent the Riksbank’s forecasts.

26. Unemployment Percentage of labour force, seasonally-adjusted data Sources: Statistics Sweden and the Riksbank Note. Broken lines represent the Riksbank’s forecasts.

27. Resource utilisation Estimated gap, percentage deviation from HP trend Sources: Statistics Sweden and the Riksbank Note. Broken lines refer to the Riksbank’s forecasts.

28. CPI and CPIF Annual percentage change Sources: Statistics Sweden and the Riksbank Note. Broken lines represent the Riksbank’s forecasts.

29. CPI forecast Annual percentage change Source: the Riksbank Note. Uncertainty band from forecast in September 2008. Broken lines refer to Riksbank’s forecasts.

30. Unit labour costs Whole economy, annual percentage change Sources: Statistics Sweden and the Riksbank Note. Broken lines represent the Riksbank’s forecasts.

31. Exchange rates SEK per EUR respective USD Source: Reuters EcoWin

32. Contents Financial market International outlook Sweden Monetary policy

33. Repo rate forecasts Per cent, quarterly averages Source: the Riksbank Note. Broken lines refer to the Riksbank’s forecasts.

34. Different measures of inflation Annual percentage change Sources: Statistics Sweden and the Riksbank Note. Broken lines represent the Riksbank’s forecasts.

35. Inflation expectations Annual percentage change Source: Prospera Research AB Note. All agents

36. Competition-weighted exchange rate Index, 18 November 1992 = 100 Source: the Riksbank Note. Broken lines refer to the Riksbank’s forecasts.

37. Summary The financial turmoil worsened last autumn and has developed into a global financial crisis. International developments will be weak this year and there is a considerable risk that economic activity will be weak next year, too. GDP growth in Sweden will be negative this year and inflation will fall. The Riksbank has cut the interest rate to 1 per cent and may need to cut it further.