It is clear that if real wage growth in the coming years is in line with productivity growth, this will facilitate the Riksbank's efforts. The Riksbank's forecast during the summer rested on the assumption that a weaker labour market would restrain the rate of wage increases to just over 3.5 per cent. But there are examples of wage bargaining rounds in which wages increased excessively despite weak demand pressures, e.g. 1995. The conflict over the Municipal Workers' Union's agreement is also indicative of tensions in the labour market. However, the two most recent wage bargaining rounds have been characterised by greater cooperation between labour market organisations. In addition to current economic conditions, this suggests that the forthcoming wage negotiations should result in economically reasonable wage rises of around 3.5 per cent. It is worth underscoring, however, that no one factor is as important for inflation - and consequently for the repo rate - as wages. The Riksbank will therefore be monitoring the autumn wage bargaining round closely. One factor that has proved difficult to assess in recent years is energy prices, in particular those for electricity. Energy prices have not fallen back as much as we expected during the summer. In August, UND1X inflation excluding interest expenditure, among other things, rose by 2.2 per cent, of which 0.7 percentage points were due to the increase in energy prices. Current forward prices suggest that electricity prices will be approximately 10 per cent higher during the autumn and winter than was indicated before the summer.
Jean-Pierre Roth: The current economic and monetary policy situation Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the Centro di Studi Bancari, Vezia, 17 September 2007. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  It is difficult to determine to what extent the turmoil in the US sub-prime mortgage market impacts on the real economy. It has hit Switzerland at a time when our economy is in enviably good shape. Should the situation in the financial markets not deteriorate any further, it is hard to imagine these factors abruptly slowing economic growth. With its decision to let the Libor slide back towards 2.75% in the short term, the SNB has clearly signalled to the markets an easing of the situation. In Switzerland, price stability has been maintained for the past 13 years, economic growth is significantly higher than in the 1990s and our unemployment rate is the lowest of all industrialised countries. It is our goal to preserve this favourable situation. BIS Review 102/2007  1