For households with debts, the scope for consumption is also affected by interest rate adjustments if the share of income used for interest payment changes. Accordingly, we take this into consideration when we make our inflation assessment. There has been a swift increase in household debt and house prices over a long period. One potential cause of concern, which we cannot disregard, is that if this trend continues at the same rapid rate, a situation could develop where, at a later date, there is a risk of a considerable slowdown in growth and employment as a result of households finding themselves compelled to increase savings owing to a heavy debt burden. The risks involved here are very difficult to quantify in forecasts or pinpoint in time, but could none the less be a threat to macroeconomic stability. Inflation could then also revert to a state that might prove difficult to deal with. However, it should be underlined that the likelihood of such a scenario arising is regarded as slight, in particular when we have identified it in good time. We have taken these factors into consideration even if they have not been crucial for our monetary policy decisions. The Riksbank does not have a target for the krona exchange rate. However, since the exchange rate is one of many factors affecting growth and inflation, we must naturally take the path of the krona into consideration in the inflation assessment. The exchange rate affects inflation directly and generally relatively quickly through prices of imported goods and services.
New information made available since our January meeting appear to confirm this. According to the National Institute of Economic Research's most recent Business Tendency Survey, the level of economic activity continued to improve in the fourth quarter of 2005 and firms were very optimistic about the future. Household expectations have also become more optimistic about their own finances and the Swedish economy. In the light of these developments, it seems reasonable to adjust the GDP forecasts for 2005 and 2006 upwards slightly compared with our expectations in December. The situation in the Swedish labour market appeared to be somewhat brighter in January and the number of those employed increased slightly more than expected. However, the trend for the number of hours worked was surprisingly weak and productivity growth in the business sector was therefore stronger than expected. There is no apparent reason to make any substantial change to that assessment either. The labour market is improving although domestic cost pressures are expected to remain subdued. Overall, this means that inflation is expected to approach the target during the forecast period, more or less as we said in December. Given the strong growth in demand, we envisage a relatively moderate increase in inflation. However, it is important to bear in mind that the inflation assessment in December was based on the assumption that a gradual increase of the repo rate would be initiated at the beginning of 2006. In January, we also decided to raise the key rate.