This means that we are often forced to raise the rate, despite the fact that the inflation rate is below the target at the point in time when the decision is made. Conversely, interest rate reductions may be motivated even when the inflation rate is above the target level. As we all know, since the end of last year, the unexpectedly severe slowdown in the US economy has led to a downward revision in the assessment of Swedish production growth over the next two years. However, according to the assessment published by the Riksbank earlier, the most serious consequence of the slowdown will be that almost all of the resources within the Swedish economy will be occupied. If this is realised, one could say that the USA-led economic slowdown is, in a way, a welcome development in Sweden. The information on the Swedish and international economies that has been received in recent months does not give reason to change the assessment of the economic slowdown in Sweden. However, the signals are rather mixed and there is still considerable uncertainty. The downside risks with regard to international growth still remain. Despite the fact that growth has so far developed largely in line with our earlier assessments, price increases have been slightly greater than we had estimated. The krona has also continued to develop weakly. However, the wage agreements that have been signed so far appear to be in line with the earlier assessments.
In the light of these developments, the Executive Board decided at its monetary policy meeting on 26 April to leave the repo rate unchanged at 4 per cent. I would like to spend the rest of my time here discussing the conditions for economic growth in the near future – both here in Sweden and abroad. The American economy is a decisive factor There is still great uncertainty over how quickly confidence in the American economy will return and what spread effects this will involve for the rest of the world. The slowdown in the American economy was preceded, as we know, by a long and pronounced economic boom. Great optimism over future growth prospects, based mainly on expectations of gains in efficiency from IT, led to a substantial increase in investment, a strong growth in consumption and rising share prices over several years. The growth in investment and rise in share prices were particularly strong in IT-related sectors. The high level of domestic demand could not be met with American goods and services, but spilled over to create a considerable deficit on the current account over several years. At the same time, there was a strong expansion of credit. Both households and companies have greatly increased their level of indebtedness, while rising asset prices have increased household wealth. This development has been reflected in a considerable deficit in savings.