In other words, Sweden is now in the sixth year of favourable economic growth. The 3% average is much the same as during the upswing in the 1980s but clearly above the annual average of 2% achieved in the 20 years from 1970 to 1990. It may be more than we can expect to sustain in the long run. An important reason why it has still been possible to keep inflation down in recent years has been the existence of unutilised capacity. This in turn has to do with the deep recession from which the recovery started and the comparatively rapid expansion of capacity since then. Medium-term inflation expectations have gradually stabilised around the 2% inflation target. At times, however, including the recent period, transitory price movements have brought the annual average change in the CPI just outside the lower limit of the target’s tolerance interval. There have even been periods when trend inflation has been lower than expected. For the decision-making of monetary policy, as the Riksbank has pointed out earlier, transitory effects on inflation are normally a secondary consideration. We are working to clarify how the target formulation is applied in order to dispel any uncertainty about how we should appraise direct effects on consumer prices that come from movements in, for example, house mortgage interest costs and indirect taxes. Altered conditions for international developments Last autumn, in the September Inflation Report, the Riksbank pointed to a growing risk of a weaker international trend on account of the crisis in Asia.
I’d be surprised if those who question our technical judgement at any particular moment could offer more than that. In the circumstances, I do not ask that the technical charge brought against us should be dismissed. But I would encourage you to suspend judgement, or at least to limit our sentence to an extended period of probation. I’m ready now for the cross examination, before the jury begins its deliberations! 3  BIS Review 31/2000