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Monetary Policy Report July 2009

Monetary Policy Report July 2009. Deep economic downturn Repo rate cut to 0.25 per cent Low repo rate over a long time Inflation close to target Signs of a turnaround Positive growth in 2010. Low repo rate over a long period of time Per cent, quarterly average. Source: The Riksbank.

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Monetary Policy Report July 2009

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  1. Monetary Policy Report July 2009

  2. Deep economic downturn • Repo rate cut to 0.25 per cent • Low repo rate over a long time • Inflation close to target • Signs of a turnaround • Positive growth in 2010

  3. Low repo rate over a long period of timePer cent, quarterly average Source: The Riksbank Note. Uncertainty bands calculated using historical forecasting errors.

  4. Deep economic downturnGDP in Sweden, annual percentage change Note. GDP at recipient prices prior to 1951 from Edvinsson (2005). Sources: Statistics Sweden and the Riksbank

  5. Low resource utilisation during entire forecast periodUnemployment, per cent of labour force, seasonally-adjusted data Note. Broken lines refer to the Riksbank’s forecasts. Sources: Statistics Sweden and the Riksbank

  6. Signs of a turnaroundPurchasing managers’ index, index above 50 indicates growth in industry Note. Yellow dot refers to outcomes that were not available at the monetary policy meeting. Sources: Institute for Supply Management, NTC Research Ltd and Swedbank

  7. Financial markets functioning betterBasis spread, basis points Sources: Reuters EcoWin and the Riksbank Note. Difference between 3-month interbank rate and expected policy rate (basis spread)

  8. GDP growth will accelerate in 2010Quarterly changes in per cent calculated as an annual rate Sources: Bureau of Economic Analysis, Eurostat, OECD, Statistics Sweden and the Riksbank

  9. Inflation close to the targetAnnual percentage change Note. Broken lines refer to the Riksbank’s forecasts. Sources: Statistics Sweden and the Riksbank

  10. Uncertainty in the forecast • Interest rate could become higher… • Weaker productivity • Faster recovery abroad • …or lower • Higher loan losses • Lower rate of wage increase

  11. Lending at a fixed interest rate • The repo rate has in practice reached its lower limit • The situation in the financial markets is still not completely normal • Lending with a fixed interest rate increases scope for monetary policy to have the intended effect • Contributes to lower interest rates for companies and households

  12. Repo rate path a forecast – not a promise Per cent, quarterly average Note. Uncertainty bands calculated using historical forecasting errors. Source: The Riksbank

  13. Deep economic downturn • Repo rate cut to 0.25 per cent • Low repo rate over a long period of time • Inflation close to the target • Signs of a turnaround • Positive growth in 2010

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