If we look at developments during the 1990s, growth since 1992 has shown an average rate of 3 per cent a year, despite the fact that inflation was under the target level for several years. At the same time, unemployment has fallen from 9 per cent to approximately 4 per cent. This can be compared with the 1970s and 1980s, when inflation was at around 8 per cent and growth an average of 2 per cent. Price stability and the importance of achieving it are also well established among the general public in Sweden. This is important, as understanding and acceptance of monetary policy is important for inflation expectations and thereby for behaviour on the labour and goods markets. It is you particularly those of you with your own businesses - who set the prices and who must be able to trust that it will turn out as we say; that inflation will not rise above or fall below the target of 2 per cent for a longer period. This is also the reason why we members of the Executive Board often travel around holding speeches. Communication with the Swedish public and the operators on the various markets is important for monetary policy. As monetary policy operates impact with a certain time lag, the instrumental rate is adjusted so that the total assessment of future inflation, taking into account the risk scenarios, 1 to 2 years ahead is in line with the target. Interest rate decisions are based on forecasts of future prices.
On the macroeconomic side, the news for the United States is mostly favorable. Labor market conditions have significantly improved over the past few years and unemployment is now around 5 percent. The household sector is much less leveraged, the housing sector is recovering, the banking system is much healthier, and the corporate sector is highly profitable, even as business fixed investment spending remains quite weak. Although inflation has fallen short of our objective, I am confident that inflation will return to our 2 percent objective over the next few years as the labor market tightens further and the transitory factors that have held inflation down dissipate. After years at the effective lower  BIS central bankers’ speeches  1  bound for short-term interest rates, economic conditions have finally warranted the start of U.S. monetary policy normalization. But these monetary policy adjustments are likely to be gradual and cautious, as we continue to face significant uncertainties and the headwinds to growth from the financial crisis have not fully abated. For Europe, the economic outlook has started to improve. The European Union is experiencing a cyclical recovery and the unemployment rate has been steadily declining over the past two years. The end of fiscal tightening appears to be a key factor in this recovery. Risks of low inflation, however, remain a concern for the European Central Bank and have motivated their aggressive use of unconventional monetary policy instruments.