If we compare the period 1970-1993 with the past twelve years, we can observe that  BIS Review 21/2006  5  growth was much higher during the latter period of low inflation (almost 3 per cent a year) than during the earlier period of high inflation (almost 2 per cent a year). Real wages have also developed better over the past ten years than during the interim period with higher inflation, despite the fact that nominal wage increases have been lower. During the 1960s and up to the mid-1970s, real wages rose every year, i.e. wage were rising more rapidly than prices. Then followed a period of 20 years when real wages did not rise at all on average. Since the mid-1990s, we have once again enjoyed a period of rising real wages. Higher productivity growth has contributed to this. The current account is showing a very large surplus. Public finances are also showing a surplus, although this does not reach the target of 2 per cent over an economic cycle. On the other hand, unemployment is now higher than before. During a very long period up to the beginning of the 1990s, unemployment was very low in Sweden. Open unemployment varied between 1 and 4 per cent. In recent years, it has varied between 4 and 6 per cent, following a peak of 9 per cent in 1997. When I studied economics at university, we were taught that lower inflation was linked to higher unemployment. This relationship was illustrated by the Phillips curve.
However, later research has shown that in the longer term there is no connection between inflation and unemployment. At the same time, I believe that the problems in the 1970s and 1980s could partly be explained by the Swedish economy being unable to manage the low unemployment we had then without excessive price and wage increases ensuing. For me, one of the most important tasks of economic policy over the coming years is to bring down unemployment. However, the Riksbank is unable to do very much about this. The Riksbank’s contribution is to safeguard the inflation target and in this way create favourable conditions for growth and employment. All in all, my picture is still that the Swedish economy has functioned much better over the past ten years than in the 1970s and 1980s. Things are better now. Current monetary policy The other part of my presentation is concerned with economic developments and current monetary policy and the reasons why the Executive Board of the Riksbank decided at its most recent monetary policy meeting on 22 February 2006 to raise the repo rate by 0.25 percentage points to 2 per cent. The Riksbank’s view of economic developments over the coming years is presented in the Inflation Report, which was published at the same time as the interest rate decision. This part of my presentation does not contain any new information or new assessments in relation to the February Inflation Report and the separate minutes of the Executive Board meeting.