announced that price stability according to this definition shall be maintained over the medium term. thereby, it provides the public with clear guidance for inflation expectations. in addition, the ecb's transparent framework facilitates the process of accountability of the ecb by providing a yardstick against which its performance can be assessed. the statement that " price stability is to be maintained over the medium term " acknowledges the existence of short - term volatility in prices, resulting from non - monetary shocks to the price level such as the effects of indirect tax changes or variations in international commodity prices. there are good economic reasons why monetary policy should be oriented towards the medium term. monetary policy affects prices with " long and variable lags ", so that a policy of fine - tuning the economy is, in practice, neither a viable nor a desirable option. it is evident that the ecb cannot be held responsible for short - term shocks to the price level, since it has little control over them. rather, assessing the outcome of the monetary policy of the ecb over the medium term ensures a meaningful and genuine accountability. having a well - defined goal is vital. in addition, the ecb, like any other central bank, also requires an analytical framework which facilitates the achievement of this goal. the ecb's strategy recognises that, in an environment of change and uncertainty, no single model or view of the world is likely to be fully adequate to capture the ongoing economic processes and the implications for price stability. the need to adopt a diversified approach to analysing and assessing information in an uncertain world was a main reasoning behind the adoption of the ecb's two - pillar strategy. the distinct, yet mutually - reinforcing perspectives of a complex and changing environment provided by the two pillars are the best tools with which the ecb can distil and master the information relevant for monetary policy - making. under the first pillar, the ecb assigns a prominent role to money. a broad array of aggregates, ranging from m3 to its components and counterparts, notably credit, are analysed in order to assess threats to price stability. assigning a prominent role to money guarantees that the fundamentally monetary origins of inflation will not be neglected in the analysis driving monetary policy decisions. the prominent role of money is signalled by the announcement of a reference value of 4½ % for the annual growth of the broad aggregate m3. this reference value defines the rate of growth of m3 which is consistent with price stability over

prior to this. energy prices are volatile but usually increase faster than the inflation rate, but they have been unusually stable during the past two years. finally, we have interest expenditure, which has pushed down cpi inflation via lower mortgage rates. why is inflation low? our examination of developments in prices for the sub - groups behind the cpi measures shows that the fall in inflation is broad and not due to any individual component. it is also difficult to point to any individual factor that has led to inflation in sweden being low. it has rather been a combination of factors. one important factor that can hardly be disregarded is monetary policy. the repo rate has been held higher due to consideration of risks linked to household indebtedness than it would have been if the aim was solely to stabilise inflation around the target. it was after the riksbank began to raise the repo rate in summer 2010 that inflation in sweden – unlike inflation in other countries – began to fall ( see figures 2 and 4 ). the monetary policy strategy has most likely contributed to inflation being lower than it would otherwise have been. another important explanation for the low inflation is the weak international economic development. sweden is a small open economy that is affected by international developments. the prices of the goods swedish companies import are affected partly by global market prices of traded goods and services and partly by the exchange rate. 6 the riksbank ’ s method of measuring global market prices of traded goods and services involves weighing together developments in prices of exports in countries that are important for swedish imports. bis central bankers ’ speeches global market prices appear to follow international economic developments relatively well. like global gdp, prices of traded goods and services fell in connection with the financial crisis in 2008. when the international recovery began in 2010, these prices also began to rise. however, in recent years, global economic activity has slowed down again and at the same time the rate of increase in global market prices of traded goods and services has fallen. over the past year, these prices have remained in principle unchanged. the prices swedish companies pay in sek for imports are also affected by the krona exchange rate. the krona weakened substantially against other currencies in connection with the financial crisis, which meant that import prices for consumer goods in the producer channel actually increased quite substantially when measured in swedish krona, despite the fall in international prices. import prices have been falling since the middle of 2012. one contributory factor was the rapid strengthening of the krona