The proposal of the Financial Crisis Commission has now been circulated for comment and I and the other members of the Executive Board of the Riksbank will now formulate our joint response to the proposal during the spring. Conclusions I thus believe that there are many indications that demand is too weak in the Swedish economy and that in principle this has been the case ever since the autumn of 2008. One should not have exaggerated expectations of what monetary policy can achieve when it comes to reducing the relatively high level of unemployment in Sweden. However, as long as inflation is expected to be clearly under the target of 2 per cent I believe there is scope to use monetary policy to try to alleviate the situation on the labour market. I have argued that one of the reasons why fiscal policy and monetary policy have not been used more actively to increase demand in the Swedish economy is the concern about financial stability. The risk that public finances will be radically weakened if the government is forced to intervene to support banks in crisis seems to be an argument for being cautious with public finances at present.
Seasonally-adjusted data Source: Statistics Sweden. 1  Long-run sustainable unemployment rate here refers to the level of unemployment that is expected to prevail when all cyclical shocks have abated, when ongoing structural changes have had a full impact and when inflation expectations are equal to the actual rate of inflation. See for example “The long-term development of the Swedish labour market”, Monetary Policy Report, July 2012. See also “Correction of the Riksbank’s estimate of the long-run sustainable employment rate”, Appendix 2 of the minutes of the monetary policy meeting, July 2012, for a discussion of the role of expectations in the assessment of the long-run sustainable unemployment rate. 2  BIS central bankers’ speeches  Unemployment has also begun to increase again in recent months and our latest forecast predicts that it will increase further to reach 8.2 per cent in the third quarter of this year. Figure 3. CPIF inflation in Sweden Annual percentage change 4  4  3  3  2  2  1  1  0  0 05  06  07  08  09  10  11  12  Note. The series refers to monthly data. Source: Statistics Sweden. Developments thus indicate that we have had spare capacity on the labour market since 2008. This is one of the reasons why inflation has been low in recent years. It also appears that inflation has in principle shown a downward trend since 2008.