Shortages have even risen rapidly in the manufacturing sector, where employment fell the most during the crisis. Only one-fifth of the jobs lost in the manufacturing industry have again been filled. This may have effects on wage formation and inflation. In our forecast, wages will increase by 3–3.5 per cent over the coming three years. Labour shortages in combination with a strong economic climate may lead to a situation in which  5  6  Examples of such factors include natural disasters or political unease in countries of production. BIS central bankers’ speeches  wages increase at a faster rate. In that case, inflation will be higher and it may be necessary to raise the repo rate more rapidly. Having discussed these risks, it may be worthwhile to point out that they are only risks. Our main scenario for future developments suggests the stable recovery of the Swedish economy and gradual increases of the repo rate. Conclusion Let me now summarise the basis for the future direction of monetary policy. Following the financial crisis, Sweden’s economy has shown a strong recovery. Growth is currently high, but is expected to decline successively. The labour market is on the road to recovery, and unemployment is falling. Prices are increasing on the world’s commodity markets, contributing to rising inflation. Resource utilisation is on the way up, also contributing to the increase of inflationary pressures in Sweden in the period ahead.
CPIF inflation has shown significantly more stable development than CPI, which includes the effects on mortgage interest expenditure of the drastic interest rate cuts implemented during the crisis, as well as the recent interest rate increases. Inflationary pressures are starting to increase in tandem with the economic recovery. This means that the repo rate has also been increased from the very low level of 0.25 per cent that prevailed one year ago to 1.5 per cent today. This allows us to safeguard the balance of Sweden’s economy and simultaneously attain the inflation target of 2 per cent. Where are we going? Having come this far, it may be appropriate to stop and spend a moment reflecting over the financial crisis and long-term economic development. As I mentioned in my introduction, the period from the mid-1990s until the financial crisis was characterised by good growth, low inflation and decreasing variation in output and prices. In addition, the financial crisis was preceded by a period of about 60 years of unbroken growth in the world economy. So we could ask ourselves: are crises of the type we have just experienced “improbable events” that take place perhaps once in fifty years and something we just have to accept? My answer is both yes and no. We have learned that financial crises are extremely costly. Governments and central banks are now busy discussing different measures both to reduce the likelihood of crises arising and to mitigate the consequences of any such crises.