some time before the inflation target is attained, the riksbank can contribute to stabilising the development of the real economy, but at the same time we must safeguard confidence in the inflation target. taking into consideration developments in the real economy must not mean that the price stability target is set aside. the two - year horizon provides scope for flexibility but at the same time sets a limit for how large the deviations from target can normally be. the fact that we have chosen to specify an exact target for inflation is an expression of our desire to be clear and open. this is also why we have explicitly stated that inflation will normally be returned to target within two years. similarly, the deviation interval around the inflation target aims to explain that monetary policy cannot, and does not, attempt to exactly attain the target all of the time. the deviation interval thus also emphasises that there must be scope for temporary deviations from the target, which may be justified with regard to avoid unnecessary fluctuations in growth and employment. we thus endeavour to attain the inflation target within a two - year time perspective, under normal circumstances. in certain cases, however, we may need to have even greater flexibility than the twoyear perspective allows. if the economy were to suffer very large supply shocks, for instance, in the form of structural changes that have a major effect on inflation, or if extreme situations such as war or natural disasters occur, the process of bringing inflation back to the target may need to take even longer to avoid excessive strain on the real economy. in this type of situation it would be even more important that there was confidence in the inflation target. however, flexibility must not be allowed to undermine the nominal anchor. if confidence were to fail, we would be forced to act more strongly and would not have the same possibility to consider the real economy. thus, the objective of monetary policy is to maintain price stability. however, it is possible to give consideration to the development of the real economy. this does not mean having a target for growth or employment. instead, this type of consideration is made possible by the way in which we have chosen to formulate the principles for attaining the inflation target. however, it assumes that there is sufficient confidence in the inflation - targeting policy. changes in our analytical framework as monetary policy has an effect after a time lag, the riksbank must look ahead and base its interest rate decisions on forecasts of future developments, for instance, regarding economic activity and inflation. like other central

if one regards 1998 prices in current terms with the aid of hicp development since then, one finds that eurostat's survey of the price level index for 1998, published in 2000. we probably still have approximately 17. 5 percentage points of the 18 percentage point difference in food prices. another field in which competition appears to be weak is the construction sector, and in particular the construction materials sector. this area is characterised by a high company concentration with considerable entry barriers to new companies and weak import competition. with regard to prices for construction materials, one can also see a much more rapid price rise than for other industrial products over a number of years, which may indicate rising profit margins or considerable inefficiency in resource utilisation. in some further fields, such as telecommunications services and electricity, deregulation had a pronounced dampening effect on price development for some time. this is no longer the case. the most recent statistics available indicate price increases of 7 per cent and 20 per cent respectively for these areas. in addition, telia has announced a large rise in its subscriber fees with effect from october. i therefore see it as natural that there are investigations underway and planned into competition conditions in these markets. vested interests versus consumer interests although we have thus achieved improvements in certain areas, it appears to me that the description in the economics commission's report of 1993 ( page 10 ) still applies to large parts of the economy. " it is evident that a number of important markets in the swedish economy function poorly and that this leads to considerable wastefulness with resources and to large costs for the national economy. the commission's assessment is that the fundamental reason is the lack of competition in swedish trade and industry. one indicator of the lack of competition is that prices on a large number of goods are much higher in sweden than in other countries. other indicators are the many public regulations of the market, the agreements between companies that limit competition and the monopoly - like market structure in many sectors. the limitations to competition are a clear example of how vested interests dominate over general consumer interests. " more recently, this type of question has arisen with regard, for instance, to the eu commission's revelations of price collaboration between the airline companies sas and maersk. from an economic perspective, these are important questions that motivate a broad discussion. from a monetary policy perspective, an influence on price developments from changed conditions for competition is one of several important areas that we at the riksbank