Moreover, falling interest rates have lowered house mortgage interest costs. Then there is the Government’s proposed reduction of tobacco tax. However, the price shocks from the supply side are mainly transitory and tend to lower the CPI temporarily but not necessarily inflation’s underlying trend. It follows that these effects probably should not have much influence on monetary policy. This holds even though the CPI change figures are likely to move outside the lower tolerance limit for a time during 1998, mainly on account of the lower tobacco tax. How strong is the upward trend? As I mentioned earlier, the primary concern for monetary policy is inflation’s underlying rate and trend. In that the monetary conditions have been expansionary for some time and both economic activity and resource utilisation are rising, Sweden should be moving BIS Review 35/1998  ˝  -8-  towards a situation with some increase in underlying inflation. This phase may not be imminent or involve anything dramatic but rising resource utilisation will ultimately lead to it. But there are some factors which may defer it. They have to do with the momentum in the Swedish economy and the impact that may come from the crisis in Asia. Another central factor is the exchange rate’s underlying trend. In addition there is the increasingly discussed uncertainty about the sustainability of international share prices. To sum up, most of the evidence suggests that economic growth in Sweden will become stronger in the coming two years.
Zdeněk Tůma: Consolidation before expansion Summary of a speech by Mr Zdeněk Tůma, Governor of the Czech National Bank, for the conference on "Modernising Germany - Gaining Competitiveness for Europe", Berlin, 1 June 2006. *  *  *  Do we really face the dilemma of choosing between consolidation and expansion? We should look at the integration process from both the political and economic perspectives. From the economic point of view, deepening and enlarging are both primarily spontaneous processes, but this does not necessarily hold for the political aspect. Unfortunately, these two perspectives are often confused, which can lead to misleading conclusions. Let me consider the economic perspective first. As a recent EU newcomer I can confirm that we observed spontaneous integration with the EU well before the timing of our accession had even been mentioned. Therefore, I do not expect the expansion of the EU to end just because there is a lack of political will for enlargement. Market forces will keep the surrounding countries “in the game”. The political and institutional framework can encourage or discourage this process, but it can hardly stop it. On similar ground, the deepening of the already integrated area is quite spontaneous from the economic point of view. For instance, we are seeing dynamic integration of the financial architecture and a growing number of cross-border mergers in both the financial and non-financial sectors. Here, too, an appropriate institutional framework would help, but the consolidation process is going on even without it.