Transcript Slides from the press conference

Monetary
Policy Report
February 2009
Major deterioration in economic activity
– repo rate cut to 1 per cent
Recovery will begin in 2010
High degree of uncertainty
Lower interest rate necessary to dampen the
fall in production and employment and to
reach the inflation target of two per cent
The Riksbank will continue to take the
measures required to promote financial
stability
Substantial lowering of the
repo rate path




Major deterioration in economic activity
Cost pressures declining
Still major problems on the financial markets
High degree of uncertainty
Recovery will begin in 2010



The measures taken will have an impact
Credit markets will function better
Confidence will return to households and
companies

Consumption and investments increase
Repo rate a forecast – not a
promise
Per cent, quarterly averages
7
7
90%
75%
50%
Repo rate
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
04
05
06
07
08
Note: Broken line is the Riksbank’s forecast
09
10
11
12
Source: The Riksbank
Consensus forecasts for GDP
development 2009 revised downwards
Annual percentage change
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
-2
-3
08Jan
Japan
USA
Eastern Europe
-1
Euro area
Asia
Latin America
-2
-3
08M ar
08M ay
08Jul
08Sep
08Nov
09Jan
Source: Consensus
Major fall in orders and
exports
Annual percentage change, seasonally-adjusted data
35
35
30
30
Orders
25
25
Export
20
20
15
15
10
10
5
5
0
0
-5
-5
-10
-10
-15
-15
-20
-20
-25
-25
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
Note: 3-month moving average, exported goods in fixed prices calculated by the Riksbank.
Sources: Statistics Sweden and the Riksbank
Higher unemployment
Percentage of labour force, seasonally adjusted data
14
14
Unemployment 16-64 year
Unemployment 15-74 year
12
12
February
December
10
10
8
8
6
6
4
4
2
2
0
0
80
82
84
86
88
90
92
94
96
Note: Broken line is the Riksbank’s forecast.
98
00
02
04
06
08
10
12
Sources: Statistics Sweden and the Riksbank
Forecast for GDP growth in
Sweden and abroad
Quarterly percentage change converted to annual rate, seasonally adjusted
data
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
Sweden
USA
Euro area
TCW
-3
-4
-3
-4
-5
-5
07
08
09
10
11
12
Sources: National sources and the Riksbank
Comparison of recovery following
previous recessions, GDP Sweden
Level, index=100 quarter preceding the beginning of the recession
115
115
2008 Q1
2000 Q3
1996 Q1
1990 Q2
110
110
105
105
100
100
95
95
90
90
-4
-2
0
2
4
6
8
10
12
14
16
Note: Broken line is the Riksbank’s forecast. Legends refer to quarters when recessions began.
Sources: Statistics Sweden and the Riksbank
Large fluctuations in the CPI
Annual percentage change
5
5
CPI
CPIF
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
00
01
02
03
04
05
06
07
Note: Broken lines are the Riksbank’s forecasts.
08
09
10
11
12
Sources: Statistics Sweden and the Riksban
Inflation expectations in line
with target a few years ahead
Annual percentage change
6
6
Prospera, money market agents, 28 January 2009
Prospera, all, 28 January 2009
Households, January
Companies, January
February
5
4
5
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
05
06
07
08
09
10
11
12
13
Note: Broken line is the Riksbank’s forecast.
Sources: NIER, Prospera Research AB, Statistics Sweden and the Riksbank
14
Recovery will begin in 2010



The measures taken will have an impact
Credit markets will function better
Confidence will return to households and
companies

Consumption and investments increase
Uncertainty in the forecasts



The crisis worsens – the interest rate is cut
to zero per cent
Quicker recovery
Weaker exchange rate and lower growth
in productivity generates higher cost
pressures
rates and repo rate has
declined
Percentage points
3,5
3,5
Difference between mortgage rates (5 year) and government bond (5 year)
3,0
Difference between 3-month mortgage rates and the repo rate
3,0
2,5
2,5
2,0
2,0
1,5
1,5
1,0
1,0
0,5
0,5
0,0
jan-04 jul-04 jan-05 jul-05 jan-06 jul-06 jan-07 jul-07 jan-08 jul-08 jan-09
0,0
Note. Mortgage rates refer to average listed rates.Sources: Reuters EcoWin and the Riksbank
Central banks’ balance sheets
growing
Percentage of GDP
30
25
30
ECB
Bank of England
Fed
The Riksbank
25
20
20
15
15
10
10
5
5
0
Jan-07
0
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
The Riksbank’s measures

Loans (against collateral) in SEK and USD

Changed collateral requirements

Special liquidity assistance

Corporate paper

Further measures may be needed
The repo rate a forecast – not a
promise
Per cent, quarterly averages
7
7
90%
75%
50%
Repo rate
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
04
05
06
07
08
Note: Broken line is the Riksbank’s forecast
09
10
11
12
Source: The Riksbank
Lower interest rate necessary to dampen the
fall in production and employment and to
reach the inflation target of two per cent
The Riksbank will continue to take the
measures required to promote financial
stability