During the current year, however, the krona has weakened relatively sharply. In the markets, the focus at present seems to be very much on interest rate differentials in relation to abroad. Personally, I find the weakening of the krona somewhat surprising given that underlying factors such as the real economy, the relative inflation rate and so on point to the opposite. For that reason, we also expected in October that there would be an appreciation in the period ahead. I have difficulty seeing any reason for us now to change that assessment in our main scenario. But a weaker krona is a risk that we have to take into account. Were the krona exchange rate to remain weak, it would of course have implications for the inflation forecast. In October, as before, we forecast that inflation would rise gradually in the period ahead. Resource utilisation was expected to pick up both in Sweden and abroad. We predicted that productivity growth would slacken somewhat and that cost pressures would gradually become higher. Substitution in favour of cheaper imported goods was expected to continue, but rising global resource utilisation was estimated to mean that global price pressures nevertheless would increase slightly on the whole. Against that background, our assessment was that UND1X inflation would rise from today’s low level and be close to the target a couple of years ahead. In my opinion, the information that has been received since October suggests that our assessment of inflation prospects at that time is holding up well so far.
Irma Rosenberg: The property market, the economic situation and monetary policy Speech by Ms Irma Rosenberg, Deputy Governor of the Sveriges Riksbank, at a seminar on the property and rental market, Karlstad, 11 November 2005. Picture to this speech can be found on the Sveriges Riksbank website, www.riksbank.com. *  *  *  Thank you for your invitation to come to Karlstad and participate in this seminar on the property and rental market. To begin with, I intend to speak about the property market and why it is important for us at the Riksbank to monitor how it is developing. Then I will discuss the economic situation internationally and in Sweden and give my view on inflation prospects and monetary policy. The property market Developments in the property market are important both in view of the Riksbank's function to promote financial stability and of the monetary policy objective to maintain price stability. On account of that we regularly monitor the situation in both the commercial property market and the housing market. That the property market is significant for the Riksbank’s stability analysis is due to the clear linkages that exist with the financial sector. The most important is that property companies are major borrowers from the banks. Moreover, a large proportion of bank lending is secured on commercial and residential property. So if problems were to arise in the property market, they could spill over to the financial sector.