At the same time, households’ savings were at a high level in 2002, which means that there may be some scope to increase consumption despite the restraining effects. Altogether, I believe there is also reason for a downward revision of the estimate of the Swedish growth rate over the coming years. The expected upturn is assessed to be somewhat superficial. This also assumes that the Iraq conflict does not develop in a way that will seriously deteriorate future prospects. The shaping of monetary policy A decisive factor in the shaping of monetary policy in future is the total picture of inflation prospects. A slightly more subdued growth in demand both in Sweden and abroad is expected to lead to capacity utilisation being slightly less strained. At the same time, energy prices have pushed up inflation. However, the Riksbank’s assessment is that the upturn in inflation is temporary and that there is  reason to expect lower inflation as early as the late spring and summer. Although, as I said earlier, this assumes that those setting prices and wages do not attempt to compensate themselves for the temporary price rise. All in all, it is a question of balancing the risks of, for instance, a weaker growth in the economy, against the risk that the upturn in inflation will have contagion effects. This is what the Executive Board must do at its monetary policy meeting on 17 March.
As Chart 2 shows, long-dated corporate borrowing rates have followed much of the downward move in government bond yields over recent years. Whether you believe this is reflective of the prospect of gloomy days to come or the result of some other factors will determine whether you – as corporate treasurers – view very long low yields as a warning or an opportunity. In the rest of my remarks I will cover four possible explanations for the current level of long yields: (i)  lower inflation expectations;  (ii)  the balance of savings and investment intentions;  (iii)  diminished potential output growth; and  1  Bernanke (2005). BIS central bankers’ speeches  1  (iv)  reduced term premia  I will argue that it would be overly pessimistic to believe that the headwinds currently affecting the nominal and real economy will persist for decades to come. But I will also argue that there are other influences on long yields affecting saving and investment decisions (including the persistent-but-not-permanent effects of a balance sheet recession, and greater weight being attached to downside risks) and on term premia (including the impact of central bank asset purchases). 2. Inflation expectations  Let me start with inflation expectations. Because some of the decline in nominal yields over recent years coincided with a marked and unexpected decline in headline inflation in the UK, a natural question to ask is whether or not this was caused by a shift lower in inflation expectations.