This dollar strength has created competitive challenges for U.S. exporters, especially in manufacturing, and has caused the trade sector to be a drag on U.S. economic activity. Looking forward, despite the fact that U.S. economic growth has been disappointing, we have actually made considerable progress toward our monetary policy objectives. The United States is quite close to its employment and inflation objectives. On employment, there still seems to be a bit of slack in the U.S. labor market. But, that margin has shrunk greatly over the past few years. Payroll gains have been at least as robust as anticipated. On inflation, we are still somewhat below our 2 percent objective. But, even here, I think there has been progress. Despite the strengthening of the dollar and the decline in energy prices, core PCE inflation has been quite stable over the past year – currently running at around 1.6 percent. That is not a tremendous difference from our 2 percent objective. So why has the United States done a bit better compared to Europe and Japan in terms of achieving our monetary policy objectives. I think there are a number of contributing factors. First, U.S. household balance sheet repair occurred relatively quickly. This is in part because the housing foreclosure process wiped out many mortgage debts. Part was accomplished by a long period of very slow household debt growth. And part was accomplished by the sharp fall in interest rates that helped cut debt servicing costs.
Villy Bergström: Should the Riksbank be concerned about asset prices? Speech by Mr Villy Bergström, Deputy Governor of the Sveriges Riksbank, at a Breakfast Meeting arranged by Round Table in Sundsvall, on 11 April 2000. *  *  *  The Swedish economy is growing more quickly than for a very long time. In 1999, GDP increased by 3.8% and during the coming three years, growth is expected to average almost 3.5%. At the same time, the prerequisites for a long-term favourable development appear better than for many decades. Almost all economic indicators are pointing in the right direction. Despite a very strong upswing, the long-term inflation expectations remain stable and close to the target for monetary policy. Central government finances are in surplus for the second year running and despite a planned tax reduction of over SEK10 billion this year, the surplus in the central government budget is expected to total at least 2% of GDP. From having had the next poorest budget balance in the entire EU in the early 1990s, the budget balance in our public finances is now among the strongest in the whole union. Since the mid-1990s, central government debt has decreased from 80 to 70% of GDP. Our country’s financial balance, ie the current account, has at the same time shown a surplus for a number of years and the foreign debt has fallen from 40 to 20% of GDP during this period.