In this context it is also interesting to look at inflation expectations; have they been affected much by the fact that we sometimes have missed the target or that we on average have been slightly below it? (Chart 4.) Even though inflation expectations can be measured in different ways, the overall picture is clear. From around 1996-97 expectations have been fairly well in line with the target a couple of years ahead. Sometimes, of course, they have moved according to the actual inflation rate, but they have not been much above or below the target for any appreciable length of time. This is a much better performance than most expected when the monetary policy regime was changed in the early 1990s, and many doubted that we would attain the low, stable inflation that we actually have achieved. Allow me to make a comment in this context. Sometimes, it is claimed that the Riksbank acts asymmetrically, being more focused on avoiding exceeding the target than falling short. However, this view is not supported by measurements of inflation expectations: economic agents do not believe that we have a “secret agenda”. Instead, they believe that we try to do exactly what we are doing: trying our best to achieve inflation of 2 per cent and a stable economic performance in Sweden. Reasons for target deviations So what has caused the target deviations in the past ten years?
Favourable results Looking back at the ten or so years that have passed since the change of regime, I think that most would agree with me that the shift in policy has turned out well and that the new stabilisation policy regime has lived up to our hopes. Sweden has gone from having been a high-inflation economy with recurring cost crises, high interest rates and unstable economic performance, to being an economy with low, relatively stable price rises and wage increases that put real money in people’s pockets, and where the risk of overheating and subsequent recession has diminished markedly. In an international perspective, too, the Swedish economy has performed well in the past decade, in stark contrast to the 1970s and 1980s. The robust performance is evident if you compare developments in a number of central variables during the 1970s and 1980s with their developments under the new stabilisation policy regime. (Chart 1.) In the 1970s and 1980s the rate of price increases stood at just over 8 per cent a year, while the corresponding rate since 1995 has been just below 2 per cent. The lower inflation rate has not entailed weaker growth in output. On the contrary, GDP growth has averaged around a half percentage point higher a year under the new regime. Productivity growth has also been more robust. The higher  BIS Review 59/2004  1  economic growth and productivity has contributed to healthy growth in real wages.