Compared with the December Inflation Report the forecast for GDP growth in 2005 has been revised up marginally to 3.2 per cent, mainly due to higher investment and increased services trade. Towards the end of last year investment in the economy grew more than expected and there is much to suggest that the fast increase will continue in early 2005. Despite last year’s robust productivity growth the number of employed fell for the second consecutive year. The fact that firms were able to boost output so sharply without hiring new staff was due to a rise in both productivity and average working time. It is reasonable to believe, though, that a continuation of strong GDP growth will result in higher employment during the forecast period. Different indicators from the labour market also suggest that a turnaround is on the way. For example, the number of temporary employees has risen since summer 2004 and the number of new job vacancies reported to Swedish employment offices rose in annual terms in the period November-January after having dropped for almost two years in a row. There is reason to expect average productivity growth in the economy to decrease somewhat as the economic upswing continues. Nevertheless, the Riksbank’s assessment remains that there has been a lasting increase in the rate of productivity growth, and the Bank’s forecasts for the coming years are therefore relatively high in a longer historical perspective.
Lars Heikensten: Introduction on monetary policy Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, to the Riksdag Committee on Finance, Stockholm, 15 March 2005. *  *  *  Allow me as usual to begin by thanking you for your invitation. I think it goes without saying that these hearings are a highly valuable feature of the open discussion of monetary policy that we are all keen to safeguard. It is also my hope that the hearings can help spread knowledge about monetary policy issues to a wider audience, especially since they are now broadcast live on television. As is customary at the first hearing of the year I intend to begin by looking back on developments last year. As we all know, inflation turned out sharply lower than the Riksbank’s target in 2004. When that happens it is natural that a debate on monetary policy should arise in the public domain. It is hardly an exaggeration to say that the discussions in the past year have been unusually lively. I commented on the debate in detail when I was here in October, but there may be reason to touch upon it again today. Subsequently I intend to present our current assessment of the inflation outlook and explain the interest rate decision we made yesterday, after which I will round off with some general reflections on Swedish monetary policy and the conditions under which it operates.