To meet the  4  When interpreting the figure, it may be useful to know that Prospera’s wage expectations systematically underestimate wage trends by around 0.5 percentage points. BIS central bankers’ speeches  7  inflation target in such a situation, the Riksbank would have to raise the repo rate more rapidly. This would further dampen employment. However, the result also depends on the reason for the higher wage increases. If these are due to the stronger development of productivity, costs will not increase and the intensifying effects on inflation and unemployment will not be experienced. My assessment is still that if wage increases were to be slightly lower than the approximately 3.5 per cent per year in 2012 and 2013 that the Riksbank estimated in its April forecast, not only inflation and unemployment, but also interest rates, could be lower. This would be preferable from the wider perspective of welfare. It would also reduce the risk that increasing energy and commodity prices or rising inflation and wage expectations will push up inflation beyond our expectations. Conclusion The Riksbank is not a party in the collective bargaining process. It is the social partners that conclude the agreements. But monetary policy aims to maintain a low and stable level of inflation. This job is made easier if wage formation works well. The effective functioning of wage formation since the mid-1990s is due to the improvement of both the conditions for wage formation and wage formation itself.
Today, the proportion of Thai exports to non-G3 countries growing significantly higher, particularly to China, and ASEAN. In parallel, the share of G3 in Thai exports has declined from more than 50 percent in 1995 to less than one-third. Ladies and Gentlemen, Turning to the final part of my talk. As a central banker, our challenge is to constantly weigh the balance between risks from global slowdown on our economic growth versus rising domestic inflation pressure. Despite more downside risk on growth at present, the central bank assesses that the Thai economy is growing at around its potential and demand pressure could transmit readily to higher inflation outcome as well as expectations. To this end, the Monetary Policy Committee has been raising the policy rate to normalize monetary policy and bring the real policy rate closer to the positive range, yet remaining sufficiently accommodative to cushion the downside risk on growth. With many uncertainties ahead, it is wise to keep the inflation rate low to ensure that the economy remains competitive and to minimize pockets of instability, whether through excessive growth of bank credits, fiscal spending, or asset price bubbles. Low inflation helps keep the health of the economy in check and preserve the purchasing power or real income of all segments of the population. This is especially important for salary earners and the poor, whose real income could easily by eroded by higher inflation. Worse is to allow inflation expectation to run away because it will be costly to get expectation well anchored again.