As for the inflation forecast used in this Report’s baseline scenario, a large part of the change responds to the direct impact of the fuel price increase. In the case of non-perishable foodstuffs, actual inflation data for the last few months show an increase that reflects December’s projections. The baseline scenario assumes that it will continue to rise at annual rates in the order of 4 to 5 percent during 2011 (figure 10). Thus, the Board foresees that annual CPI variation will return to the tolerance range during the second quarter of 2012 and will stay at 3 percent until the end of the year. This forecast assumes that the propagation of price increases in foodstuffs and oil will follow historic experiences. It also assumes that the economy will grow at a pace consistent with its capacity, limiting the propagation of these shocks to other prices and to labor cost pressures. Private inflation expectations are similar to those described in the baseline scenario. March’s Economic Expectations Survey (EES) shows an inflation rate at December of this year of 4.4 percent. The Financial Operators Survey for the second half of March shows inflation one year ahead at 4.4 percent. These two figures are slightly higher than they were in December 2010. For the medium term, expectations also rise and the EES of March foresees inflation two years ahead at 3.2 percent (figure 11). With respect to end-of 2010, breakeven inflation figures derived from financial asset prices have also increased for all the different terms.
New statistics for the manufacturing sector, where employment has developed very weakly since the start of the crisis, also show that employment is increasing and that companies are planning for further new recruitment. We expect employment to continue to grow relatively strongly over the coming years (see Figure 7). Unemployment is now decreasing rapidly. It has fallen by over one percentage point over the last year. Our assessment is that unemployment will continue to decrease towards just over 6 per cent by 2013 (see Figure 8). BIS central bankers’ speeches  5  CPI inflation is presently unusually high. This is primarily connected with the circumstance that we are now in a phase in which interest rates are being increased. Mortgage rates are included in the CPI and they are increasing at the same rate as the Riksbank raises the repo rate – or, recently, even slightly faster. We expect CPI inflation to remain high in the years ahead (see Figure 9).2 CPIF inflation (the CPI with a fixed interest rate) provides a better view of underlying inflationary pressures and shows that inflation is currently low. The effect of rising energy prices on inflation has so far been counteracted by the strengthening of the krona. However, the main reason for the low rate of inflation is the weak development of unit labour costs. Productivity has increased rapidly at the same time as the rate of increase in hourly wages has been low.