slowed markedly. therefore, as compared with the last three years, growth in export revenues will ease considerably this year and in the years to come. gdp growth will be lower, as will the rise in our real income as a nation, no matter what we may decide about nominal pay increases in wage negotiations or about how we distribute such increases. this also means that the equilibrium exchange rate of the krona has probably fallen in the recent past, which in turn may partially explain the recent depreciation of the krona. the deterioration in external conditions is not good news, of course, but we must place it in the context of the substantial improvement that has taken place in recent years. on the whole, however, this turning point is positive in a number of ways. the growth rate of the past few years was unsustainable, and it tested the capacity limits of the domestic economy. according to the central bank forecast published yesterday, the landing will be a soft one. gdp growth will measure 2. 6 % over the next three years, close to the average level that will allow the economy to grow without importing labour. the positive output gap will narrow gradually and close by the end of the forecast horizon, which is in 2021. there will be virtually full employment for the entire period, and purchasing power will continue to rise. inflation will rise above the target in 2019 but then remain close to the target for the rest of the forecast horizon, partly because the forecast assumes that interest rates will rise when inflation does. some observers might say that this is too good to be true. it could turn out that way, of course, but that would be because known or unknown risks not included in the forecast had materialised. there are so many things that could happen in this regard. there could be economic policy mistakes ; for instance, if the central bank ’ s real rate declines more than is justified by fundamentals, or if fiscal policy provides a similar stimulus. were this to happen, the output gap would remain open longer and inflation would be higher. the correction, when it came, would be steeper, and the adverse impact on gdp growth would be more pronounced. the markets could undershoot or overshoot, derailing the economy at least temporarily. external shocks could strike as a result of trade disputes or further increases in oil prices, and indeed, the alternative scenario in the most recent monetary bulletin includes just such factors. wage negotiations could result in broad - based pay rises far larger

some specific practices designed to enhance current disclosures. these include quarterly disclosure of some market - risk information now disclosed annually, and enhanced quarterly disclosures about credit concentrations and credit quality. although it is still too early to say for sure, i am optimistic that the recommendations in this report will lead to improved disclosure practices at our largest and most complex financial institutions, and perhaps others. i would also note that the federal reserve staff is developing recommendations for how reviews of disclosure practices could be included in the supervisory process. on a slightly different front, bank supervisors have substantially stepped - up their efforts to use market information in supervisory surveillance of the lcbos. for example, last summer, fed staff began providing regular reports to supervisory personnel on the subordinated debt spreads and expected default frequencies derived from stock prices for selected lcbos. these reports also provide information designed to help supervisors interpret whether changes in an institution's debt spread or expected default frequency are significant. early feedback from line supervisors has been quite positive. indeed, the board has instructed supervisory and research staff to devote substantial efforts to improving our ability to use market information in our surveillance activities. the importance of using market information as an aid to supervisory surveillance was a major recommendation of a report to the congress, " the feasibility and desirability of mandatory subordinated debt, " submitted by the board and the treasury department late last year. in that report, the board, the occ, and the office of thrift supervision promised to continue and to enhance their " use of data from the subordinated debt, equity and other markets to evaluate the current and expected future condition of large depository organizations. " in addition, the agencies pledged to continue monitoring both subordinated debt yield spreads and issuance patterns at individual institutions. neither the board nor the treasury recommended adopting a mandatory subordinated debt policy at that time, although the door was left open for possible future action. i know this is a disappointment to some, including at least one member of the panel here today. indeed, i have also expressed an inclination to move in this direction. in the end, however, the board and the treasury judged that the evidence in favor of a mandatory subordinated debt policy was simply not strong enough to justify its adoption. we came to this conclusion for three broad reasons. first, because the current market for subordinated debt already provides measurable market discipline, the marginal benefits of a mandatory policy are very uncertain. second, all of the complementary policies that i discussed in the first part