The primary factor behind the falling inflation rate is a growing confidence in inflation targeting, which during the years following 1993 gradually affected inflation expectations. In recent years the repo rate in Sweden has been lower than the corresponding steering interest rates in the USA, the UK and the EMU area. Many doubted whether Sweden as a small country outside of the euro area would ever be able to live with short-term interest rates lower than those set in Frankfurt. However, we have succeeded in doing so for some time. If one looks at the short-term real interest rates now, they are at approximately the same level as in the euro area and Sweden, at around 2 per cent. The fact that we in Sweden succeeded in achieving a good growth rate during the second half of the 1990s without causing overheating and raised interest rates, was because we started off with a very low level of resource utilisation. Following the crisis at the beginning of the 1990s, unemployment was at a record high level and there was considerable unutilised capacity in industry. It was not until recently, since the end of last year, that we have begun to approach the capacity ceiling. Furthermore, Sweden has shown a positive development in private saving throughout the entire 1990s, and the household sector's burden of debt is currently much lower than it was after the crisis at  BIS Review 34/2001  1  the beginning of the last decade.
The duration of these stops will depend on the COVID-19’s behavior, but in any case, it will take a big toll on second-quarter investment. The baseline scenario assumes that these projects will resume normally towards the third quarter of this year. We must bear in mind that the economy’s performance since last October provides a weak starting point to deal with the COVID-19 emergency. Although the latest IMACEC2 showed a recovery in activity levels— including the February figure (2.7%) we published this morning—the sanitary measures affect more acutely those sectors that had already been hit by the social unrest. Also, household consumption is coming from a significant contraction in the latter part of last year, while investment was sustained by construction and other works, mainly mining projects. In the labor market, the national unemployment rate as reported by the National Statistics Institute for the moving quarter ending in February showed a bigger increase than in previous months, while other indicators point to a marked worsening in employment quality. Particularly striking is that in recent months a large proportion (92%) of the increase in total employment has been in salaried informal jobs, which do not provide the benefits that formal salaried employment does, including paid sick leave (Figure 7). Some financial variables such as the exchange rate, stock prices, and credit growth were also in less favorable levels than they showed at the onset of the social crisis.