Some figures indicate that most of the adjustments have now been made, but the picture is not unambiguous. Nevertheless, a recovery is under way, after what must be regarded in many areas, and particularly in Sweden, as a fairly mild  2  BIS Review 15/2003  slowdown. Our forecasts indicate an average GDP growth over the coming years in line with the economy's long-term sustainable rate and resource utilisation is expected to remain largely unchanged over this period. This means that economic activity and the labour market are not expected to put any great pressure on prices and wages at present or in the coming years. There is, of course, a risk that developments will follow completely different paths than those we anticipate in our main scenario. This could in turn entail both upside and downside risks for inflation. The downside risk that concerns us most is connected to international developments. There are problems in the euro area in particular that could lead to a weaker development. The upside risks are mainly linked to domestic price-setting and wage formation. The rise in energy prices pushes up costs in other parts of the economy and can spread. It could also affect expectations and wage demands. We are facing collective wage bargaining rounds in the autumn, which will play a decisive role for the future of the economy.
Today, expectations are of a largely unchanged level of resource utilisation. Thus, price pressure is not as high, either, as long as no secondary effects arise from the energy price rises. Forecasts guide policy Let me conclude by underlining two important aspects when assessing monetary policy. Firstly, the Riksbank, like many other countries with inflation targeting, has chosen to look ahead when making monetary policy decisions. This is clearly seen when the actual policy is compared in the evaluation appendix with simple, rule-based decisions on the basis of observed GDP growth or actual inflation. The import of this is, of course, that forecasts of inflation and GDP growth become more decisive for monetary policy than the actually observed growth rates in price levels and GDP. A disadvantage of this policy is that forecasting mistakes have effects on policy. But one advantage, which we consider  4  BIS Review 15/2003  to outweigh this, is that monetary policy becomes less disjointed, more predictable and on the whole more stabilising for economic developments. Of course, the Riksbank could have raised its rate more when inflation rose because of higher food and energy prices during 2001. But would this have rapidly subdued inflation and led to a more beneficial development in the economy? I don't think so. Secondly, it is difficult both to make and to assess forecasts, as our picture of history and the current situation constantly changes as a result of revisions to the statistics.