But there is still reason to ask oneself how permanent the subdued wage increases are. The second challenge has to do with unemployment. The key question is: Has unemployment bottomed out? Or can it fall further with an expansionary monetary policy? My assessment is that it will not be possible to bring unemployment down much further with monetary policy alone. In my view, the increasing demand for labour that we are currently witnessing is more likely to lead to increased labour supply than to lower unemployment. This is also what Labour Force Survey flow statistics show. Further reduction in unemployment requires measures from other policy areas. The third and final challenge is the fact that skills matching on the labour market has deteriorated. This implies that output and employment are not as high as they could have been without the matching problems. Monetary policy can scarcely improve matching on the Swedish labour market. Here, too, measures in other policy areas are required. It is a question of increasing productivity among unemployed persons and reducing the cost of employing them. Labour market policy has a crucial role to play here. 15 [16]  References Bell, D.N.F. and D.G. Blanchflower (2018), “The Lack of Wage Growth and the Falling NAIRU”, NBER Working Paper 24502. Blanchard, O. (2016), “The Phillips Curve: Back to the ’60s?”, American Economic Review: Papers & Proceedings 106(5), 31–34. Cunliffe, J. (2017), “The Phillips curve: lower, flatter or in hiding?”, speech at the Oxford Economics Society, 14 November, Bank of England. Dow, J.C.R.

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