It may be that some of the difference in the rise in clothing prices in the two countries is due to the way prices are measured and interpreted rather than to actual price developments. This is also supported by Eurostat’s price level survey. Eurostat compares different countries’ prices for identical goods and finds that the level of clothing prices in Norway has in fact risen somewhat compared with clothing prices in Sweden in recent years. According to the CPI in the two countries, clothing prices in Norway have fallen by 30 per cent relative to clothing prices in Sweden in the period 1999-2005. The goods measured in Eurostat’s survey are probably not representative of the basket of consumer goods in Norway. The survey nonetheless illustrates the uncertainty surrounding actual developments in clothing prices. Allow me to conclude. Inflation in a country with its own national currency is not something that just drifts in with the wind from abroad. It is monetary policy that over time determines the nominal path. In the short and medium term, we can weigh the variability in inflation against the variability in output and employment. Nevertheless, the overriding objective is to anchor expectations of low and stable inflation. We must never lose sight of this. There is considerable uncertainty surrounding the economic situation and economic developments ahead. Statistical forecasting techniques and macroeconomic models can help us gain further insights into and a better understanding of the driving forces, but can obviously not eliminate risk and uncertainty.
Getting back to the credit expansion in the household sector, the development we see in Sweden today is not unique. The American economy has been the subject of much recent discussion. A growing number of voices have warned that the risks have been built up into something of a financial bubble. The apprehensions derive from highly inflated asset values, low saving and increased indebtedness, i.e. in principle, a similar situation to the one we currently have in Sweden. Total lending by American banks increased in March by 10.1% compared with March 1999 and lending in relation to GDP is currently at a historically high level. The lending statistics show that the primary increase is in lending 2  For example, a 5-year government bond. 3  BIS Review 50/2000  for housing, due to rising property prices. At the same time as lending is increasing, saving is declining. Over the last five years, saving as a proportion of disposable income has fallen by nearly 5 percentage points and amounted to a low 2% during the last quarter of 1999. Sweden has shown a similar development. During the last five years, the saving ratio has fallen by over 9 percentage points and is currently at 2%. There are thus several signs of a development that is worrying from the view of financial stability. The rising debt ratio has without a doubt made households more vulnerable. However, as in Sweden, employment and households’ financial assets have increased, which favours the households’ ability to pay.