Of course, I was a little uncertain as to whether I should just be pleased about this. But I think there is reason to be; it shows namely that we have a monetary policy regime which is stable and not dependent on single individuals. Inflation targeting – some thoughts on the future As I have mentioned, the macroeconomic outcome for Sweden has been relatively good over the past decade. Of course, this does not prevent there being questions worth discussing and much that can be improved. This also applies in the field of monetary policy. An important question in this context is what one can expect from monetary policy. If the expectations are excessive, there is a risk they will lead to the wrong issues being discussed and, if the worst comes to the worst, to political discontent that will undermine the current monetary policy system. Reasonable expectations According to the Sveriges Riksbank Act, the Riksbank is to safeguard price stability. We have chosen to implement this by keeping inflation at a target level of 2 per cent. The fact that the legislator has been clear that low inflation should be the target for monetary policy and nothing else, such as high growth or low unemployment, is because inflation is the only factor the Riksbank can govern in the long term. It is therefore unwise, and perhaps even counterproductive, to give a different impression.
In this Report the forecast in the main scenario is based on the assumption that the repo rate evolves in line with implied forward interest rates. According to this assumption the repo rate will remain at 1.5 per cent up to about the second quarter next year, when it gradually begins to be raised. Overall, the Swedish economy is forecast to grow at a comparatively firm rate during the forecast period. GDP growth is estimated to be 2.3 per cent this year and 3.0 per cent next year. Thereafter, it will gradually fall towards just over 2 per cent in 2008. Compared with the assessment in the June Report, this is an upward revision and the fundamental outlook is now more positive. For this year it is mainly the revision of the outcome for the first quarter that has affected the forecast. After that it is, among other things, the more expansionary economic policy compared with our June Report – both a slightly lower repo rate and more expansionary fiscal policy – that have raised the forecast.1  Resource utilisation to increase gradually There are now signs that the situation in the labour market is improving. Among other things, the number of hours worked has begun to rise and indicators of the number of redundancy notices and new job vacancies also point to a more robust labour market.