UNDIX inflation, which excludes indirect taxes, subsidies and interest expenditure, is judged to be 1.8% one year ahead and 2.1% after two years. (Figure 5). The Riksbank also attempts to identify any risks of developments that differ from the path in our main scenario. This time round we saw somewhat greater risks of inflation being above the target than below. The main reason for this is the uncertainty about how the stronger growth will affect the labour market and wages. To this I want to add another evident risk—that the price of oil does not fall back as we ave envisaged. An oil price around $ in the coming years would lift inflation 0.1-0.2 percentage points above the main scenario. On the downside the main risk is a more marked slowdown in the US economy. Lower trade-off between growth and inflation? Now I want to touch on a matter that has been prominent in the debate after the publication of the Inflation Report. How will inflation be affected by the higher growth we foresee? The attention accorded to this question is only natural, for several reasons. The Riksbank now counts on growth that is clearly higher than we expected in June but has not made much of an upward revision to its assessment of inflation. Moreover, good growth is foreseen by virtually all observers and the consequences of this for inflation are therefore a central concern for everyone. But no one has the answer and that is what usually fuels a lively discussion.
The Riksbank’s picture of what this could mean for inflation is partly based on empirical studies that have been presented in earlier Inflation Reports. These results likewise suggest that the economy is somewhat less inflation prone, though the picture should not be over-interpreted. In a world with low and stable inflation, it is conceivable that wage demands may be formulated differently. A given level of real wages can be attained with considerably smaller nominal wage increases and perhaps with greater precision. Another factor that is often mentioned in the discussion is the concept of a new economy, that is to say, how the trade-off between growth and inflation may have been modified by increased global competition and information technology. This theme has been stimulated not least by the example of the United States, where high growth has been achieved year after year without boosting inflation; but that is a topic for a separate address. Today I shall simply make two points. One is that effects of this type can enable the economy to cope with higher resource utilisation without an acceleration of inflation, that they can raise potential growth or they can lower the inflation propensity. Thus, the so-called new economy can conceivably affect the inflation assessment in the ways I discussed earlier. The other point is that demonstrating effects of this type on inflation empirically is presumably even more difficult in Sweden than it is in the United States.