CPI is affected by technological changes, making it cheaper to make phone calls and to use the Internet. Inflation is also affected by the changes that come under the designation of globalisation, and that lead to increased trade and competition and to, for instance, cheaper imports of TVs. During the first three months of the year, inflation has not been as low as expected in the forecast made in February. This is mainly because energy prices have been slightly higher than calculated. In February we believed that CPI would be 1.5 per cent in March. Instead it was 1.9 per cent. Higher costs lead to higher prices One explanation as to why inflation is expected to rise in future is that growth in productivity – how much is produced per hour worked – is slowing down. At the same time, wages are rising slightly faster than they have done in recent years. All in all, this means that companies' costs are rising more quickly. It is difficult to say when a higher rate of increase in costs will lead to a higher rate of increase in prices. Many Swedish companies are currently making large profits and can probably manage a period with higher costs without raising their prices. There are also other factors holding back inflation. For instance, prices of many imported good are continuing to fall. Better understanding productivity Inflation has been below target since the beginning of 2004, but we can now see that it has begun to increase again.
Stefan Ingves: The Riksbank and the Swedish economy Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, to the Swedish Association of Local Authorities and Regions, Tylösand, 28 May 2007. *  *  *  Introduction Firstly, thank you for the invitation to come and speak to this assembly. Today I will talk about my views on the role of the Riksbank and about the current monetary policy situation, roughly as expressed in the discussion at the May monetary policy meeting. International economic activity remains good Sweden is a very open economy and large parts of the business sector are dependent on being able to sell their products to customers abroad. If the economies in countries around us are doing well, then the Swedish economy also does well. In recent years global growth has been extremely high. We believe that the growth rate will slow down slightly in 2007 and 2008, but will nevertheless remain high. After many years of high growth the US economy has now entered a slowdown phase. Economic activity has been dampened above all in the housing sector, but also in the manufacturing industry. Productivity growth is lower. The earlier upturn in house prices has slowed down and residential construction has declined. The problems have been aggravated by the fact that it has been easy for people with low incomes to obtain large loans for housing. As yet the problems in the housing market do not appear to have spread to the rest of the economy.