Since the financial crisis in 2008-2009, many central banks have kept their policy rates close to or even just below zero to stimulate the economy and inflation. As further reductions in the policy rate are not judged to be effective or risk creating major negative side effects – there is much talk about the effective lower bound – it has become common to use other types of monetary policy measures. One measure used by the Riksbank and other central banks is to buy bonds on the secondary market, which means that the balance sheet increases substantially, see Figure 1.

Figure 1. Several central banks have expanded their balance sheets Balance sheet relative to GDP, per cent, quarterly data

In 2015, the Riksbank began purchasing Swedish government bonds to counteract the then too low inflation. Since the outbreak of the coronavirus pandemic in spring 2020, the Riksbank has also purchased other types of interest-bearing securities, such as covered bonds, municipal bonds and corporate bonds, with the aim of supporting the economy and counteracting problems in the financial markets. The coronavirus pan-demic entailed a very uncertain future for both households and businesses, with large sections of society being shut down to prevent the spread of infection. In that situation, central banks and other authorities needed to take over some of the financial risks that the private sector did not wish to, could not or dared not hold onto, to contribute to the smooth functioning of the economy. The Riksbank's assessment was that Sweden was in danger of dramatically deteriorating growth, increased unemployment and problems in the financial markets, unless the Riksbank and other authorities acted with the tools that were available. For the Riksbank, asset purchases were an important part of this, although this meant that the Riksbank's balance sheet and financial risks simultaneously increased.

During the period of asset purchases, the Riksbank's balance sheet has gone from the equivalent of around 10 per cent of Sweden's GDP to almost 30 per cent. It also appears in Figure 1 that other central banks have chosen to expand their balance sheets both more and to a higher level in relation to GDP during this period. The Riksbank's total holdings of Swedish securities for monetary policy purposes amounted to SEK 975 billion at the end of 2021, see Figure 2.