An unexpectedly steep increase in global demand for oil, not least from the rapidly growing Chinese economy, seems to have been a significant driving force behind the rise in the oil price in 2004. This has led to a marked decrease in the idle capacity in the oil sector. Other relevant factors include unease over the situation in the Middle East and the various circumstances surrounding the Russian company Yukos. The rapid, short-term changes that have characterised the price formation in the oil market also point to a not insignificant element of speculation. Exactly what weight should be attributed to different factors from time to time is difficult to establish. But it is clear that the overall price rise in 2004 has been demand-driven to a larger degree compared with other occasions when the oil price has risen sharply. The increases in the oil price in 1973-74, 1979-80 and 1990 were as we know essentially a result of reductions in the oil supply. The demand for oil will of course play an important part for price developments in the period ahead as well. A key aspect is that more and more countries that previously were economically undeveloped will take the step towards more energy-intensive production. Even if new innovations can be put to use in a couple of years, the fast growth in many developing countries points to a relatively high oil price in the period ahead, too.
In addition, we might choose to include effects on the payment system and on general economic performance if, for instance, we saw a significant risk of a future financial crisis. The clarification of our monetary policy that we published in 1999 states that we would explain clearly the reasoning behind our decision if this situation were to arise. Naturally, this question - of whether the risks are sufficiently large to require special consideration in the monetary policy decision - is not a simple one. It concerns weighing up difficult issues about which opinions may differ from time to time. So far, however, considerations with regard to the effects of house prices and household indebtedness on factors other than the inflation rate have only played a marginal role in interest rate policy. Inflation and monetary policy Let me conclude with a summary of my current views on inflation and monetary policy. Since the early summer, inflation in Sweden has developed roughly in line with the Riksbank’s assessment in May. Inflation is low both by Swedish and international standards, at around 1 per cent. At the same time, it is important to emphasise that the decisive factor for monetary policy is not the present inflation rate, but our views regarding future inflationary pressures. At our monetary policy meeting in May, the Riksbank judged that inflation would remain relatively stable over the coming year and then increase gradually as a result of rising international and domestic resource utilisation.