Experience has shown that once such rates have been communicated, they guide the market to a high degree up to entry. Lower resource utilisation but large risks in both directions In the Report we count on inflation falling back again next spring. This year’s appreciably lower resource utilisation has a lot to do with that but so does the prospect of last spring’s rapid price increases coming to an end so that the earlier effects drop out. In the latter part of the forecast period inflationary pressure in the main scenario becomes somewhat stronger as the economy recovers fairly rapidly. 6  BIS Review 89/2001  Support for this picture is to be found if one goes behind the price statistics and looks at wages and unit labour costs (Diagram 6). Even with the rather substantial downward revision of productivity growth, these costs rise at a moderate rate throughout the forecast period. That should ensure that even if inflation does not fall back quite as much as calculated, its level will be low. The overall assessment is that in September next year CPI and UND1X inflation will 1.5 and 1.7 per cent, respectively, while the rates in September 2003 will be 2.1 and 2.0 per cent. 6.
To date we have published a report on EMU’s conceivable importance for the Swedish krona; the conclusion was: not much, provided - and it is a major proviso - Sweden provides equal conditions in other respects for wealth formation and business enterprise. The krona’s part in the assessment of inflation has varied One of the topics in the discussion during the past six months has been how the Riksbank reacts to the exchange rate in the formation of monetary policy. We have been accused of being indistinct or dithery during the summer and autumn. First let me say that there is a pattern to this that I find familiar. Conducting and interpreting monetary policy is more difficult when the situation is appreciably affected by other factors than resource utilisation, for instance the exchange rate or inflation expectations. The assessments are then more complex and the Riksbank faces greater educational challenges. The decisions also tend to be more controversial because there is a clearer conflict between different goals, so that more criticism is only to be expected. Our forecasts are always based on a variety of factors. A traditional model for determining inflation in the context of a Phillips curve, for example, points to resource utilisation, inflation expectations and the exchange rate as central components. However, these variable’s relative importance for inflation changes over time.