It means that it is not reasonable to evaluate monetary policy in the basis of the opinion that inflation must always be on target. One should rather assume that inflation will rarely be exactly on target. In addition, the Riksbank deliberately allows inflation to deviate from target during shorter periods. This has been the case, for instance, when there have been temporary changes in inflation that we have not considered to warrant being counteracted by monetary policy. For example, we assumed that inflation would be below target at the beginning of 2004 due to energy prices having temporarily pushed up price in early 2003. However, inflation turned out to be even lower in 2004 than we had expected. But what I would like to say here is that one must expect inflation to deviate from target sometimes and that there are good reasons for this. I therefore consider that it is wrong to claim that monetary policy contributes to higher unemployment just because inflation is below target during a particular period. Another thing one can expect from the Riksbank is that we should make the best forecasts we possibly can. It is also important that our forecasts are evaluated. Last year our monetary policy was evaluated by two external professors, Giavazzi and Mishkin. They considered that the Riksbank’s forecasts for inflation compare favourably with those of other forecasters. However, for both 2004 and 2005 both we and other analysts overestimated inflation. This leads me on to some other questions I intend to take up.
Open unemployment did not fall more than to around 4 per cent at the peak of the most recent economic upturn. This also indicates that there are structural problems in the labour market that have also increased over time. There are, for instance, signs that the matching of unemployed and vacancies has deteriorated after the 1990s crisis. Increased globalisation and stiffer international competition, and the ensuing structural transformation, may also have played a role. The pressure for change in the labour market has been strong and adjustments have not been made as smoothly as might have been desirable. It is evident that the high unemployment that arose in connection with the crisis has to some extent been persistent. Research shows that the long-term unemployment level may be affected by major changes in actual unemployment. There is also research that show that generous unemployment insurances may contribute to the persistency of unemployment. Especially after major structural crises have occurred, such as the one in Sweden at the beginning of the 1990s. 4 I shall not develop this further. The functioning of the labour market lies outside the Riksbank’s field of responsibility and there are others who are better qualified to discuss the problems in this area than I am. My main message is that there are many indications of considerable structural problems in the Swedish labour market which may explain the high level of unemployment. These problems cannot be solved by monetary policy.