Periods of low productivity are normally followed by periods when productivity recovers quickly. The labour market and current monetary policy Last week the Executive Board of the Riksbank decided to hold the repo rate unchanged at 0.25 per cent. But at the same time we made it clear that the time for a repo rate increase was not too far off. This could come in the summer or the early autumn. But even with the increases in the repo rate included in our repo rate path, monetary policy will be expansionary for a long period of time. The real repo rate is negative throughout the whole year, and will be below one per cent for the whole of 2011. The underlying CPIF inflation rate, that is, the CPI excluding the effect of changes in mortgage rates, is now relatively high at 2.5 per cent. But our assessment is that inflation will begin to fall, partly as a result of a stronger krona. In addition, slowly rising wages and increasing productivity growth will together mean that companies can produce goods at low cost. As economic activity strengthens the inflation rate will be pushed up and when we look ahead to the end of the forecast period it is close to 2 per cent. The forecast for the CPIF is therefore only marginally changed, compared with the assessment in the February Monetary Policy Report. Resource utilisation is an important variable for monetary policy as it is, for instance, an important indicator of future inflationary pressures.
The paper notably shows how monetary policy affects banks’ lending policies by making their liabilities more expensive. 8  Page 9 of 19  9  Page 10 of 19  This slowdown in credit supply is justified after the sharp rise in private debt ratios in recent years. Interest rates also influence the foreign exchange channel. The past depreciation of the euro has amplified the rise in imported prices, particularly those of commodities which are global and set in dollars. The 16% fall in the euro against the dollar between mid-2021 and mid-2022 would, if it had stayed at this level, have had an estimated impact of roughly +0.6 percentage points on the level of consumer prices over the long term. The monetary policy conducted since then by the Eurosystem has contributed to the recent re-appreciation of around 8% in the euro, which should gradually have the opposite effect. Do I need to say it again? We do not have an exchange rate target, but we closely monitor the effects of the exchange rate on inflation; it is good to see that they have become more favourable again since last summer. 10  Page 11 of 19  II. A few pointers: from the “sprint” to monetary normalisation in 2022 to the “long-distance race” towards monetary stabilisation As of the end of 2021, we responded to the inflationary shock with a rapid and clear shift in monetary policy stance.