In this period there have been only two occasions when the krona has fluctuated more than 2 per cent against the German mark. Managing transitory effects The subject of the Riksbank’s attitude to the inflation target is also raised from time to time in the media. It has been claimed that the Riksbank shows less concern about inflation moving outside the tolerance interval’s lower limit than it does about the upper limit being exceeded. That is not the case. A couple of years is too short a period on which to base arguments that deviations from the targeted rate are a sign that policy has not been symmetric. Monetary policy work involves a lot of uncertainty, which is no doubt inevitable when the interest rate has to be set on the basis of forecasts that extend several years into the future. At present, moreover, assessments are particularly difficult so soon after the changeover to a low-inflation regime, with all that this may involve in the form of altered behaviour by households and firms. Another complication is that in recent years, inflation throughout the world has been lower than expected. Another aspect of this issue is the Riksbank’s choice of a target variable. Every conceivable indicator of inflation has its shortcomings and these have to be weighed against the advantages when choosing monetary policy’s target variable. The consumer price index (CPI) has the advantages of being well-known and established among economic agents and people in general as a measure of inflation.
In work at the Riksbank on monitoring prices in the Swedish economy, we could not fail to notice some positive changes in competitive conditions and pricing in recent years, as well as some more negative patterns that seem to be persisting. BIS Review 47/1998  -4Let me take the positive aspects first. One is the favourable price trend for imported goods in recent years. This is particularly notable in that for much of this period the exchange rate has been comparatively weak, which by itself should push import prices up. A favourable price trend has also been observed for food products, for example; this seems to be a consequence, at least in part, of Sweden’s membership of the European Union. Today, moreover, there are many indications that the combination of European monetary union and increased IT-based trade, for instance, will make competition even stronger. There is a general difference between the development of administered prices and market prices for goods and services. The administered prices have risen faster. This may be a result of increased fee setting in the public sector in recent years, both in connection with structural moves away from tax financing and to fill existing “holes” in public finances. Then there is the classic explanation that it is not so easy to raise productivity growth in some parts of the services sector. This no doubt applies in particular to a number of the services that are mainly provided under public auspices, such as medical care and care of the aged.