Difference between inflation in Sweden and Germany Percentage points 12  12  10  10  8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4  -6  -6 60  63  66  69  72  75  78  81  84  87  90  93  96  99  02  05  08  Note. Inflation is measured as the annual percentage change in the CPI. The series is equalised using a 3-month moving average. Sources: Statistics Sweden, Federala statistics agency in Germany and the Riksbank  Figure 2. Relative unit labour costs and nominal exchange rate: Sweden compared to Germany Index, 1960=100 225  225  Relative unit labour costs Nominal exchange rate: DEM / SEK  200  200  Relative unit labour costs converted to SEK  175  175  150  150  125  125  100  100  75  75  50  50  25  25  0  0 60  63  66  69  72  75  78  81  Note: Exchange rate is EUR/SEK from 2002. BIS Review 154/2008  84  87  90  93  96  99  02  05  08  Sources: Bureau of Labor Statistics and the Riksbank  9  Figure 3.
In the USA it has fallen in three consecutive months and in the euro area it fell to 2.1 per cent in November. In Sweden, inflation fell to 4.0 per cent in October, but our assessment is that it has fallen significantly in November here too (see Figure 11). Inflation is high but is declining rapidly One of the issues that we have had to take note of during the year has been the considerable fluctuation in the prices of food and energy. One of the reasons that we increased the interest rate in the period up to the autumn was to prevent the price increases that started on the world market spreading to other areas via price-setting and wage formation. During the year, I have argued that it did not appear to be especially likely that short-term increases in the prices of food and energy would push up wages by leading to demands for compensation for the price increases. The slowdown in growth and the weakening of the labour market are factors that weighed against such a scenario. There are also three-year agreements on large sections of the labour market that regulate agreed pay increases and these do not contain, as was the case in the 1970s and 1980s and is still the case in some other countries, price development guarantees that provide automatic compensation for price increases.