The Riksbank's activities 2014: Expansionary monetary policy to stimulate inflation

Date 09/02/2015

Growth in the Swedish economy was dampened by the sluggish recovery of the euro area. Demand has been restrained by the euro area countries that have attempted to reduce their high levels of indebtedness and by the geopolitical uncertainty in the region. However, Swedish households' economy and consumption developed relatively well. Inflation was unexpectedly low and, measured as the change in the consumer price index (CPI), it amounted to –0.2 per cent as an annual average. Average inflation measured as the CPI with a fixed mortgage rate (CPIF) was 0.5 per cent.

"We could see that inflation was becoming lower than we had expected and therefore lowered the repo rate successively to zero per cent. At the same time, we adjusted our interest rate forecast, the so-called repo-rate path, downwards. It is important that inflation rises towards the target of 2 per cent as the inflation target acts as an anchor for price and wage formation." This is what the Governor of the Riksbank, Stefan Ingves, states in his comments on the Riksbank's Annual Report 2014.

Among other things, the Annual Report presents a review of the Riksbank's work on analysing risks that could build up in the financial system and threaten its stability. The Swedish financial system functioned well during the year, but the vulnerabilities underlined were that the Swedish banking system is large in relation to the Swedish economy and that the major banks are dependent on foreign wholesale funding. This means that Swedish banks are sensitive to both disruptions on the international financial markets and to impaired confidence in the Swedish banking system. Swedish households' high and growing indebtedness remains a risk that could threaten both real economic and financial stability in Sweden in the long run. The Riksbank also describes the continued work on preparing the banknote and coin changeover, which will start in 2015.

The Annual Report contains the Riksbank's balance sheet and profit and loss account, which shows that the Riksbank's profit rose by SEK 5.3 billion, to SEK 3.3 billion. The improvement in the results is largely explained by smaller write-downs related to the Riksbank's assets and liabilities. The balance sheet total increased during the year by SEK 70.8 billion to SEK 502.4 billion, mainly as a result of exchange rate fluctuations.

The Riksbank's Annual Report for 2014 can be read as a parliamentary document in Swedish via the link below. English and Swedish versions of the Annual Report, in the Riksbank's standard layout, will be published on 27 March 2015, when it will be possible to download the report or order copies through this website.