Following the monetary policy meeting at the end of June, new inflation figures have been published for June and July. These show that the CPI and the CPIF rose by 1.1 and 1.7 per cent respectively in July, compared with the same month last year. Inflation is so far in line with the assessments in the Monetary Policy Report: in July underlying inflation was only 0.1 of a percentage point lower than the forecast in our Report. Long-term inflation expectations It is important to the Riksbank that long-term inflation expectations in society are anchored securely around the inflation target of 2 per cent. This makes our work easier. If most people expect inflation to be 2 per cent, this affects price-setting and wage-formation, so that we can more easily attain the inflation target in the long term (even if short-term fluctuations cause inflation to deviate from the target level). This is the reason why we carefully follow inflation expectations. According to a survey from Prospera, inflation expectations for the coming five-year period were on average 2.2 per cent in June. This figure represents an average for all respondents. (Figure: Inflation and inflation expectations). Recovery in the Swedish economy To summarise, the new information presented during the summer supports the Riksbank’s view that the Swedish economy is continuing to recover. GDP growth has so far this year been slightly higher than we had expected, and the labour market has shown slightly stronger development. Inflation has largely been in line with our forecasts.

Source: IM F  GDP growth in the USA Annual percentage change 5  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3 00  01  02  03  04  05  06  07  08  09  10  11  12  Sources: IMF and the Riksbank  BIS Review 109/2010  9  Purchasing managers’ index Index figure above 50 indicates growth 65  65  60  60  55  55  50  50  45  45  40  40 Euro area  35  35  USA  30  30 00  01  02  03  04  05  06  07  08  09  10  Sources: Institute for Supply M anagement, M arkit Economics and Swedbank  Inflation in the USA Annual percentage change 6  6  5  5  4  4  3  3  2  2  1  1  0  0 -1  -1 CPI USA  -2  -2  CPI excluding energy and food USA  -3  -3 00  01  02  03  04  05  06  07  08  09  10  11  Source: Bureau of Labor Statistics  Central banks’ balance sheets Per cent of GDP 30  30 The Riksbank  25  20  25  ECB Federal reserve  20  15  15  10  10  5  5  0 jan-07  0 jul-07  jan-08  jul-08  jan-09  jul-09  jan-10  jul-10  Sources: Bureau of Economic Analysis, Eurostat, Statistics Sweden and the respective central banks  10  BIS Review 109/2010  GDP growth in the euro area Annual percentage change 5  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2  -3  -3  -4  -4 -5  -5 00  01  02  03  04  05  06  07  08  09  10  11  12  Sources: IMF and the Riksbank  Inflation in the euro area Annual percentage change 5  5 HICP total HIKP excluding energy and unprocessed food  4  4  3  3  2  2  1  1  0  0  -1  -1 00  01  02  03  04  05  06  07  08  09  10  11  Source: Eurostat  Public finances in the OECD-area Per cent of GDP 2  100 Government net lending General government gross financial liabilities  0  95  -2  90  -4  85  -6  80  -8  75  -10  70 00  01  02  03  04  05  06  07  08  09  10  Source: OECD  BIS Review 109/2010  11  Interest rate differential against Germany Percentage points 10  10  Greece Ireland  8  8  Italy Portugal Spain  6  6  4  4  2  2  0  0  -2 Jan-07  -2 Jul-07  Jan-08  Jul-08  Jan-09  Jul-09  Jan-10  Note.