On the other hand, the turmoil on the financial markets and weaker growth in the world economy were expected to curb growth and inflation in Sweden. This led to our decision to hold the repo rate unchanged at 4.25 per cent, a decision I voted in favour of. We also held to our forecast that the repo rate would remain at this level over the coming year in order to bring inflation back to the target over a period of a couple of years and to enable production and employment to develop in a balanced way. We also emphasised that there was still considerable uncertainty over future developments. Personally, I saw an evident risk that the slowdown in the United States could become more prolonged than was assumed in the forecast. I also saw a risk that the rapid price increases in the world energy and food markets could subdue demand and thereby growth in the rest of the world, which could also further hold back Swedish growth and inflation. There were also clear signs that the Swedish labour market was about to cool down and my view was that the weak productivity growth indicated that companies’ demand for labour could decline. This indicated that there was no great risk that the rate of wage increase would accelerate more than anticipated. This was the combined reason why I did not wish to rule out the possibility of a cut in the policy rate later in the forecast period.
The analysis made in that scenario only takes into account an alternative outcome for the oil price. The analysis made in a monetary policy decision takes into account everything that has happened in the economy. How all these aspects should be weighed together is something I and my colleagues on the Executive Board will have to consider when we meet for a new monetary policy meeting in the first week of July. 6  BIS Review 68/2008