After many years of exceptional growth, a rapid cooling off is now taking place in the American economy. The indicators that have been received in recent months have mainly led to successively downward adjustments of future GDP growth in the United States by most forecasters. What argues in favour of a brief downturn is the fact that the effects of the IT development in spreading to the rest of the economy can hardly be regarded as exhausted. Investments in the American economy have been of a record size and a lot of these investments have been related in fact to IT investments. Depreciation periods are also short there, which in itself reduces the risk for locking-in effects in large mistaken investments. However, it can also be noted that both households and companies have a high level of debt. They have invested and consumed more than they have produced during the period in question and the current account has therefore been in substantial deficit for a number of years. (See Diagram 1). The savings deficit indicates high indebtedness in both households and businesses. If optimism about the future were to be replaced by considerable uncertainty, the high indebtedness would per se reinforce the cyclical downturn and make it more prolonged. Uncertainty about the future can lead to businesses and households restraining demand in order to consolidate. BIS Review ?
Despite oil prices more than tripling from the beginning of 1999 to the end of last year, inflation expectations stayed at the Riksbank’s target. If expectations also increase, monetary policy must be made considerably more stringent to expel inflationary expectations from the economy. From this point of view, it is important that monetary policy is reviewed and that a discussion takes place on the Riksbank’s actions, although the importance of the bank should not be exaggerated. Having said that to provide a perspective on the tasks we have at the Riksbank, I should like to move on to discuss the economic situation in Sweden. Favourable growth During the past three years, GDP has increased in Sweden by an average a bit more than 3.5 per cent. The rate of growth is increasingly higher than what is possible in the long term. The Swedish economy has expanded approximately a half per cent more quickly per year than the euro area in the past four years, although over one per cent more slowly than in the United States during the same period. BIS Review ? ?/2001  1  Strong foreign trade has made a positive contribution to growth in Sweden for large parts of the 1990s and since 1994, the current account has been in surplus. The weak exchange rate for the krona throughout almost the whole of this period with a floating exchange rate, combined with the vigorous growth in the telecommunications sector have been the driving forces underlying the increase in exports.