As regards information technology, we are well to the fore, although it is first recently that statistics indicate some increase in productivity growth. Expectations for a continued strong increase in productivity in the USA have also been a basis for the strong rise on the American stock exchange. The high share prices and the positive expectations have stimulated demand and the debt ratio in the private sector has increased. It is not possible to write off the risk of financial imbalances being built up in the USA, which risks having negative effects on the macroeconomy. However, many analysts consider that the long-term growth rate has in fact increased in the American economy and that the expectations that have served as the basis for investments and increased indebtedness will therefore be realised. Even if there are some indications that point to the Swedish economy undergoing a similar development to the American, the structural differences cannot be disregarded, which probably create greater inertia in the Swedish economy than in the USA. The labour market is one such area. As I mentioned earlier, considerable barriers to competition also remain in the Swedish economy. Another difference is that the cyclical upswing we are now experiencing is taking place at the same time as growth is increasing in the surrounding world and resource use is increasing. The American upswing could benefit from a surrounding world with a lot of free resources and low price pressure and with few competing investment alternatives for international investors. Should monetary policy counteract financial imbalances?
How shall monetary policy be designed if there is a risk for exaggerated indebtedness and overheating? A decision-making rule the Riksbank sometimes uses to motivate its monetary policy decisions can in simple terms be described as follows: when inflation exceeds the target in a one-to-two year horizon, then the interest rate is increased. Interest rate increases reduce the demand for goods and services, which in turn reduces inflationary pressure. In our simple conceptual framework, inflationary pressure is then assumed to vary with the use of resources in the economy. When there is free capacity, inflationary pressure is low in the absence of so-called shocks. When demand is so high that it exceeds the level that is compatible with the long-term production path, inflation tends instead to exceed the target. The line of reasoning is based on inflationary expectations being established close to the target for monetary policy. Price increases when demand is strong may for instance depend on bottlenecks being created in some part of the production chain. As the company in this situation, cannot improve its profits by increasing its volume of sales, profit margins are increased by price increases. Shortage of labour also increases the risk for excessively high wage increases. The result will be higher inflation. If we strictly apply such a simple rule for decision-making, we shall then disregard the risk of building up of financial imbalances and overheating as long as inflation is not deemed to exceed the target during the forecast period.