Villy Bergström: Monetary policy and wage formation in Sweden Speech by Mr Villy Bergström, Deputy Governor of Sveriges Riksbank, at the HSB Bank’s Finansdag, Stockholm, 13 November 2002. *  *  *  Let me begin by thanking you for the invitation to come to HSB and for giving me the opportunity to discuss wage formation. As you know, the Riksbank's objective is an inflation rate - measured against the annual change in the consumer price index (CPI) - limited to 2 per cent, with a tolerance interval of +/- 1 percentage point. As interest rate decisions affect price pressure, partly through resource utilisation, with a certain time lag, monetary policy needs to be based on the total assessment of the rate of price increase one to two years ahead. Payroll expense accounts for approximately 70 per cent of the total value added in the economy and is thus crucial to the development of costs and prices. Wage formation has also gained increased topicality since the Swedish Municipal Workers' Union decided to terminate its collective wage agreement before the third year. The Riksbank's assessment in the October Inflation Report also pointed to high wage increases as a potential risk factor for domestic inflation. New conditions for wage formation in the 1990s New conditions for wage formation were created at the beginning of the 1990s. Monetary policy became more clearly focussed on maintaining low inflation and tighter fiscal policy was necessary to consolidate public finances.
Almost 900 businesses responded to our last poll, some of which were from this area. If you, as a representative of a small business, would like to participate in our current poll, please pass your card to my colleagues, who are in the audience, or see me after the speech and we will be glad to add you as a respondent. Results from our prior polls stressed the problem of access to capital. In response we held two workshops at the Bank in December. In the first workshop, senior officers from the Export-Import Bank, the Small Business Administration and the Department of Commerce described the various loan programs available to small businesses from their agencies, as well as programs to help identify markets. The second workshop reviewed the business plans of 40 small businesses and matched them with potential lenders. We plan to hold a similar workshop in Upstate New York this year. As you know, even states that are wealthier, such as New York, have large pockets of poverty. So, we target some of our work specifically to low- and moderate-income groups. We have worked hard to help neighborhoods that face high foreclosure rates, although much remains to be done. We have provided housing advocates with the latest information on mortgage conditions, via mortgage briefs, roundtables, presentations and newsletters. We have developed an interactive online tool that shows monthly delinquency and foreclosure conditions, which we believe will aid the work of housing counselors and other parties seeking to help these communities.