Source: Statistics Sweden  14  BIS Review 100/2008  The policy rate in Sweden Per cent 5  5  4  4  3  3  2  2  1  1  0  0 00  01  02  03  04  05  06  07  08  09  10  11  Note. Broken line represents the Riksbank’s forecast in the M PR 2008:2. Source: The Riksbank  GDP growth in Sweden Quarterly change in per cent, seasonally-adjusted data 2,0  2,0  1,5  1,5  1,0  1,0  0,5  0,5  0,0  0,0  -0,5  -0,5 00  01  02  03  04  05  06  07  08  Sources: Statistics Sweden and the Riksbank  BIS Review 100/2008  15  CPI and CPIF Annual percentage change 5  5 CPI 4  4  CPIF  3  3  2  2  1  1  0  0  -1  -1 -2  -2 95  96  97  98  99  00  01  02  03  04  05  06  07  08  Note. The CPIF is the CPI with a fixed interest rate. Sources: Statistics Sweden and the Riksbank  Summary The picture presented in July remains largely unchanged, with lower growth and high inflation.
This is the highest figure measured since the mid-1990s. Inflation is now far above the inflation target of 2 per cent. The upswing in inflation over the past year can largely be explained by rises in energy and food prices, but higher wage increases and weaker productivity growth also contribute to higher inflationary pressures. Higher interest rates also contribute in the short term to the high inflation through rising housing costs. The forecast in the Monetary Policy Report was for inflation to remain high over the coming year and then to fall towards 2 per cent at the end of the forecast period. Continued high inflation expectations For a long time inflation expectations have been firmly anchored around the inflation target of 2 per cent. There have thus been no special reasons for us at the Riksbank to highlight them in our reports and speeches. However, since the beginning of 2006 inflation expectations have gradually risen. According to the Prospera survey in June, inflation expectations for one year ahead were 3.2 per cent and expectations for five years ahead were 2.6 per cent. The expectations for one year ahead are largely in line with our own forecast, but the fact that expectations for five years ahead are way above the inflation target is more worrying. The rising inflation in Sweden and abroad would not be a problem if it was just a question of a temporary rise and if inflation expectations remained at a low and stable level.