The way we at the Riksbank conduct our monetary policy is described in the brochure “Monetary policy in Sweden”, which was published in May this year and is available on our website. I shall here reproduce the main features of the brochure and provide some comments of my own. The target for monetary policy is to maintain a low and stable level of inflation. The assignment we have been given by Parliament is to “maintain price stability”. The Riksbank has specified an inflation target whereby the annual change in the consumer price index (CPI) is to be 2 per cent with a tolerance interval of plus/minus 1 percentage point. The target for monetary policy is thus formulated in terms of CPI. However, when we analyse the development of inflation, we look at several different measures. Underlying inflation measured as UND1X is one such measure. This excludes household mortgage interest expenditure and the direct effects of taxes and subsidies. The former is particularly important, as an increase in the policy rate pushes up the CPI. It then looks as though inflation increases when we raise the policy rate, despite the fact that this measure will in the long-term dampen inflation. There is no such problem with UND1X. However, we also look at other measures. For the purpose of more clearly explaining the analysis, it may sometimes be necessary to disregard energy prices, or to divide inflation up into price developments on imported and domestically-produced goods. The effect of monetary policy on inflation has a considerable time lag.
Svante Öberg: The Riksbank and the Swedish economy Speech by Mr Svante Öberg, Deputy Governor of the Sveriges Riksbank, at a meeting of SIMRA, the Swedish Society of Business Analysts, Stockholm, 5 October 2006. *  *  *  I would first like to thank you for the invitation to this lunch meeting. Today I intend to speak about monetary policy and wage formation. This is a very topical subject, particularly given that most of the collective wage agreements in the labour market are due to be renegotiated next year and that wage formation has such significance for developments in inflation and the stability of the Swedish economy. Wage formation has functioned much better over the past 10-15 years than it did during the 1970s and 1980s and it is essential that this good development can continue. I will divide my speech into five parts: First a section on how monetary policy is conducted, followed by a section containing a long-term perspective on economic developments, and then a section on how wage formation has changed, a section on the conditions for wage bargaining and finally I will conclude with a summary. Allow me to begin by describing how we work at the Riksbank. How monetary policy is conducted In Sweden we now conduct monetary and exchange rate policy based on inflation targeting and a floating exchange rate. This is different from the decades up to autumn 1992 when we had a fixed exchange rate as target.