In spite of the differences between the Nordic countries, our central banks cooperate closely with each other. The central bank governors meet regularly for discussions, and once a year there is a big meeting between the central banks' Executive Boards and a number of experts, depending on the themes that are up for discussion. Together with Estonia, Latvia and Lithuania the Nordic countries are jointly represented in the International Monetary Fund (IMF) and the World Bank. This has partly resulted in close cooperation between the countries' respective central banks on all issues related to the IMF. Furthermore, a memorandum of understanding was recently signed by the Nordic central banks regarding the management of financial crises. There is also a continuous exchange of expertise between the Nordic central banks. The Riksbank expects moderate inflation The Riksbank's monetary policy remit is to adjust interest rates with a view to influencing price developments so that inflation is 2 per cent one to two years ahead. As a basis for our decisions, we carry out regular forecasts of inflation and economic activity in Sweden. Thus, at our monetary policy meetings, we in the Executive Board must decide whether inflation is forecast to be above target,  BIS Review 46/2003  1  which usually implies raising the repo rate, or whether it will be below target, thereby resulting in a repo rate cut.
Inflation has fallen back since June but not as much as we had expected. This is because energy prices have not dropped as forecast. This decline will now come somewhat later. Excluding energy prices, inflation two years ahead is expected to be on target. Risk factors for Swedish inflation What then are the risks and threats that we see regarding a continued improve-ment in economic activity? In the Riksbank's Inflation Reports, we always assess the risk of inflation being higher or lower than in the main scenario that we present, which in turn is closely related to our forecast of future economic activity. There is a risk that international economic activity will be slacker than in our main scenario. In the US, the large deficits in the public finances and current account may prompt a rise in long-term interest rates, which in turn would hamper consumption and investment. The large current account deficit implies that there has been a substantial flow of capital to the US from abroad. Good productivity growth and high GDP growth have so far contributed to considerable confidence in the US economy. This has enabled the US to attract international investors. But should investors believe that they risk earning less or risk losing money by investing in US assets, their interest will wane. This could give rise to both a weaker dollar and a rise in bond yields.