It was common for central wage agreements signed during the 1980s to contain price trend guarantees, wage development guarantees, earnings guarantees, checkpoints etc., which led to prices and wages pushing one another upwards in an increasing spiral. On 1 March 1990, the Government appointed the Rehnberg Commission to follow negotiations of new central wage agreements in the labour market and to act to achieve new agreements that would contain price clauses to replace the agreements for 1990 and new agreements for 1991 and lead to a radical reduction in total wage increases, including wage drift, during 1991. Based on the Commission’s proposals, stabilisation agreements were signed for the period 1 January 1991 – 31 March 1993 for just over 75 per cent of the labour market, which contributed to the rate of wage increasing falling from around 10 per cent in 1990 to 3 – 4 per cent a year during 1992 – 1993. After that, however, the rate of wage increase rose again to around 6 per cent in 1996. In April 1997 I was given the task by Deputy Labour Minister Ulrika Messing of making an inquiry into wage formation and mediation. When I was given this task, the social partners in the industrial sector had recently (in March 1997) signed a new cooperation agreement, known as the Industrial Agreement, whereby the parties took joint responsibility for wage formation in their part of the labour market and had agreed on a regulatory framework for negotiating wage agreements.
However, later research has shown that in the longer term there is no connection between inflation and unemployment. At the same time, I believe that the problems in the 1970s and 1980s could partly be explained by the Swedish economy being unable to manage the low unemployment we had then without excessive price and wage increases ensuing. For me, one of the most important tasks of economic policy over the coming years is to bring down unemployment. However, the Riksbank is unable to do very much about this. The Riksbank’s contribution is to safeguard the inflation target and in this way create favourable conditions for growth and employment. All in all, my picture is still that the Swedish economy has functioned much better over the past ten years than in the 1970s and 1980s. Things are better now. Current monetary policy The other part of my presentation is concerned with economic developments and current monetary policy and the reasons why the Executive Board of the Riksbank decided at its most recent monetary policy meeting on 22 February 2006 to raise the repo rate by 0.25 percentage points to 2 per cent. The Riksbank’s view of economic developments over the coming years is presented in the Inflation Report, which was published at the same time as the interest rate decision. This part of my presentation does not contain any new information or new assessments in relation to the February Inflation Report and the separate minutes of the Executive Board meeting.