This picture of the real economy in the main scenario gives a relatively stable development of inflation around the 2 per cent target in the years ahead, both in terms of the consumer price index and of indexes of underlying inflation. The risks surrounding the main scenario are chiefly concentrated to two alternative scenarios that point in different directions. One alternative scenario has to do, of course, with the risk of a deeper global economic slowdown with further stock-market falls. The Swedish economy would be affected via lower export market growth and more subdued demand from households and firms. That would keep inflationary pressure in Sweden down compared with the main scenario. However, the downside risk for inflation in Sweden would be somewhat limited in that the exchange rate would remain weak as a consequence of the lower international activity and concern about its effects on the Swedish economy. The other alternative scenario concerns a risk of higher domestic inflation. The current round of wage negotiations is still in progress and several of the signals in this respect are not encouraging. If the remaining settlements were to be above the levels that have been agreed to date, inflationary pressure may grow, both as a direct result of the high outcomes and indirectly through a greater risk of compensatory wage drift. It is also conceivable that productivity growth will be lower than assumed in the main scenario, leading to rising pressure from costs.

At the same time, expansion is accompanied with changes in the market ability to better accommodate market participants needs for funding, diversification and risk appetite. Undoubtedly, institutional participants in the financial markets find themselves with a larger number of possibilities for business developments and financial specialization. In addition, general public interest in using financial market products and services has increased dramatically based on the benefit they perceive from improved efficiency in everyday life activities. These developments highlight the importance of financial markets for our economic well-being, from a qualitative perspective. Let’s also recall that economic improvements trigger and support changes in social and cultural aspects of our life, bringing our nations closer to international values and principles, and to each other. As expected, because of the historical background, our countries have differed in the speed and in the depth, with which they have moved along the transition phase in the last decade. While we had many similarities in adopting the first basic and urgent reforms including price liberalization, enterprise restructuring and privatization in some economic areas, we were more distinctive in completing other reforms that would allow for institutional building capacities, which on the other hand, would make these changes root deeper in our societies. Today, our countries enjoy stable macroeconomic environments. We are experiencing low inflation levels, stable exchange rates, a more prudent and responsible fiscal policy associated with limited and manageable budget deficits. National Central Banks have established their independence and are perceived in public as respectable and reliable authorities.