To create understanding and support for the goal of price stability, it has been necessary to explain the conceptual framework that guides monetary policy decisions in a simple, pedagogic way. This has perhaps resulted in our creating an exaggerated idea that monetary policy decisions are arrived at with the aid of very simple rules. A simple conceptual framework is a support in a complicated reality. However, factors that cannot be captured in a simple rule for decision-making need to be taken into account. Since the effects of monetary policy extend over a number of years, every decision must rest on assessments of probability and individual valuations of the risks that are associated with alternative developments in the macroeconomy in future. In conclusion, I draw attention to some of these risks in the development of the Swedish economy in the present situation. The three pillars of economic policy A well-balanced economic policy contributes to creating good prerequisites for stable, high growth, which is generally regarded as an important component of the welfare concept. For this, it is required that all components of economic policy play their roles well. This applies to fiscal, structural and monetary policy. Good conditions for growth are created when uncertainty about future income and expenditure is minimised. If at the same time resources are used where they make the greatest contribution to welfare, there are prerequisites for good development.
In the most recently published inflation assessments, it was assumed that the price stability target was not threatened during the forecast period despite the growth of demand being so strong that use of capacity was under strain at the end of the period. The majority view of the Executive Board was therefore that there was no reason to increase the repo rate. This assessment was based on free resources in the initial situation, good productivity growth, low price increases on certain recently deregulated areas, low import prices and finally low inflation expectations. It is not per se strange that GDP can increase as much as 3-4% for a couple of years without inflation sharply accelerating, if the use of resources is low initially. If the pattern from previous cyclical upswings was to be repeated, price pressure should now increase. However, it has proven difficult to identify any exact and very stable correlation. As I mentioned earlier great changes have taken place in the Swedish economy. While there are still considerable deficiencies in competition in many areas, it is nevertheless not probable that inflation will accelerate strongly in the next few years. An important reason for this is that the price stability target has now  BIS Review 48/2000  4  obtained such strong support that inflation expectations are not increasing despite a cyclical upswing that is stronger than for a very long time.