For example, in our July/August 2018 Desk surveys, only 33 percent of respondents who provided expectations for this spread expected it to narrow to two basis points or less by year end. On the other hand, the dynamics of the decrease in the spread since June seem very similar to earlier periods, as can be seen in Figure 9. In particular, as noted above, rates on eurodollar transactions have lagged. 28 The distribution of reserves throughout the banking system has important implications for rates and volumes in the federal funds market. Federal funds and other market rates above the IOR rate could reflect frictions related to the distribution of reserves across the banking system; this dynamic may occur at levels of reserves not consistent with aggregate reserve scarcity. For further discussion, see Afonso, Armenter, and Lester, “Size Is Not All: Distribution of Bank Reserves and Fed Funds Dynamics,” Federal Reserve Bank of New York Liberty Street Economics (blog), July 11, 2018. 12  interbank volumes trading at rates above the IOR rate, increased overdraft activity, shifts in bank payments behavior, or a day-to-day relationship between shifts in the stock of reserves and overnight interest rates. As discussed earlier, the upward pressure in EFFR likely reflects the premium on borrowing from FHLBs in fed funds relative to other funding sources. In addition, it also likely reflects bargaining dynamics among banks with limited access to alternative shortterm funding sources.
Our assessment is that unemployment will reach approximately 6.5 per cent at the end of the forecast period (see Figure 19). A lasting  BIS central bankers’ speeches  5  reduction in the level of unemployment also demands that wage formation is effective so that costs in the business sector do not increase too rapidly. …and inflation can approach the target A new round of collective bargaining has now begun and the wage demands presented so far are higher than those presented in 2010. The Riksbank’s assessment is that wages will rise by almost 3.5 per cent per year in the years ahead. This is compatible with the inflation target. The assumption behind our forecast is that wage formation will work as well as it has over the last 15 years. Responsibility for this lies with the social partners. The krona is an important factor for inflation in Sweden as it determines how prices abroad are “translated” into import prices in Sweden. Historically the krona has weakened in periods of financial unease as investors often move their money from small currencies like the krona to the dollar and the euro. However, the krona has weakened only moderately this time, despite the financial unease (see Figure 20). We expect the krona to gradually strengthen as the financial unease subsides. The combination of falling commodity prices internationally and a stronger krona means that inflationary pressures from abroad will be rather low in the period ahead.