This is probably partially because, over time, there are smaller variations in wage growth than there are in inflation, and partially because wage agreements provide important information on future  2  See J. Johansson, S. Palmqvist and C. Selander, “The CPI will increase more rapidly than the CPIF over the next few years”, Economic Commentary no. 5, 2011, Sveriges Riksbank. 3  Hourly wage costs are estimated to increase above hourly wages by 0.2 per cent per year. For the sake of simplicity, I have chosen to disregard this difference. 6  BIS central bankers’ speeches  wage growth. Over the last 14 years, the Riksbank has had an average forecast error of 0.4 percentage points in its spring forecasts of the next year’s wages. However, the error has been significantly larger in certain years. Wage increases in the years ahead will ultimately be determined both by the final agreements and by economic developments. There is a risk that the rapid improvement of the labour market will push up wage increases faster than we have calculated. This applies to both agreed wages and wages over and above agreement. There are signs that matching on the labour market may have deteriorated. Labour market shortages are increasing rapidly, even though unemployment is still relatively high (see Figure 12). The Beveridge curve, which shows the connection between unemployment and vacancies, also indicates impaired matching. On previous occasions when the vacancy rate has been at the current high level, unemployment has been just below 6 per cent.
The full impact of these developments are only likely to be clear some years from now. This is indeed a most unfortunate situation. When factions exacerbate fractions, it damages even the most established forms of international cooperation. Third, the exponential speed of technological change has altered the global economic landscape and requires us to adapt fast. The proliferation of providers offer services that challenge the status quo. The dynamism of digital financial services redefines the nature of product delivery. It adds to the complexity of regulations and presents new challenges for economies, with broad consequences. Unattended, these challenges create risks that can stunt innovation, cause dislocation of labour and destabilise financial systems. Look at how ransomware attacks such as WannaCry and NotPetya have rattled internet users around the world. These virtual intruders infiltrated our synthetic selves, blocked access to our personal and professional files, and held us ransom by demanding payments to unlock them. These malwares infested computers operating on outdated and susceptible systems. For the financial sector, these recent attacks reinforce the lesson that, if we take a neutral stance to the IT revolution, we open ourselves up to weaknesses that can be extremely costly. For policymakers, these costs can have significant externalities that we must be concerned about. During World War II, Alan Turing and a team of experts took six months to crack the Enigma code. In contrast, today, Google can detect a virus in mere minutes through its algorithms.