According to the timetable for the new legislation, the Riksdag’s final decision will be made sometime in the middle of November. It will be followed by the appointment of the Riksbank’s new Governing Board, which will consist of eleven Delegates. One of its major tasks  BIS Review 80/1998  -4-  will be to appoint the Riksbank’s new Executive Board. This Board will consist of six full-time members who will direct the Riksbank and decide monetary policy as of January 1999. The present situation Sweden’s monetary policy is conducted in a flexible exchange rate regime and has an explicit inflation target. We sometimes use the following simple rule of thumb to describe what governs our actions: if the overall assessment of inflation indicates that in one to two years time the rate of inflation will deviate from the 2 per cent target, then the repo rate should be adjusted accordingly. Our approach is symmetrical, which means that it is equally important to avoid undershooting the target, as it is to avoid overshooting it. The Riksbank’s appraisal of inflation up to the autumn of 2000 and the monetary policy conclusions that can be drawn from this are presented in the Inflation Report we published last week. In order to visualise the consequences for the future path of monetary policy, the report is based on the working assumption of an unchanged repo rate.
This is shown by the fact that from the mid 19th century up to the late 1960s growth in Sweden was  BIS Review 80/1998  -2-  among the highest in the world. It is rather the case that the favourable outcome was promoted by low inflation and the stability this represents. The decades immediately after World War Two were particularly notable for high growth, low inflation, external balance and an optimistic mood that resulted in the Swedish economy’s successive expansion. That was a prosperous period with a good, stable economic trend, a rising standard of living and high employment. After the collapse of the Bretton Woods system in the early 1970s it proved difficult to establish an equally robust fixed exchange rate regime. A firm anchor no longer existed for economic policy in general and wage formation in particular. Sweden experienced a series of devaluation cycles, with an expansionary fiscal policy, inefficient wage formation and growing structural problems. With the deregulation of the financial sector the problems became all too evident. During the 1970s and 80s economic growth in Sweden became weaker than in other countries. But the economy still became overheated and this, together with an expansion of public sector activities, meant that unemployment was restrained for the time being. The situation was of course unsustainable. An inflationary, speculative bubble cannot grow indefinitely; sooner or later it is bound to burst. There was also a limit to the public resources for financing employment.