to feel hesitant over financing the current account deficit, there would be considerable consequences for the global economy. however, the american economic picture is still fragmented. it is true that the household sector's consumption is still at a high level and developments in the construction and residential sector are also satisfactory. moreover, the large fall in the confidence indicators seems to have slown down, at least for the time being. but at the same time, industrial production is still weak, the inflow of orders is falling and the adjustment of stocks is moving unexpectedly slowly, particularly in the sensitive it sector. the figures from the labour market also look gloomy and leading indicators are retreating. although the stock exchange has shown an upturn in recent weeks, it is still very volatile and the household sector's burden of debt is continuing to increase. leading economists have ceased talking of a v - shape when they describe economic developments. the upturn will come, but it will probably take longer than was estimated a month or so ago. this is what one should bear in mind when regarding the four american interest rate reductions of a total of 2 percentage points during the spring, two of them outside of the normal federal reserve board meetings. it is hardly likely that the fed knows something they have not told the market, which is what is sometimes implied by analysts. this is not the way a central bank works. however, the american economy came to a standstill more quickly than expected and the fed probably fears that the unease on the financial markets will frighten away both investors in real capital and consumers from spending their money. this fear is certainly justified. then, of course, one can feel some hesitation over the fact that monetary policy is taking on the role of short - term saviour of the american consumers, who can thus carry on consuming beyond their incomes for some while longer, i. e. with a negative savings ratio. if the substantial optimism regarding the future that is reflected, for instance, in the development in savings proves partially unwarranted, the problems may become even more difficult to handle at a later stage. although the focus is on the usa at the moment, concern over developments in japan has increased recently. here there appear to be both severe problems in the real economy and in the finance sector, as well as political difficulties in dealing with these problems. in the insurance sector there are a number of major life insurance companies that are insolvent in the technical sense, as they have promised pensioners a

we have directed our policies towards price stability and thus, hopefully, left behind us a long period of price and wage spirals, followed by devaluation and where growth was lower than in our competitor countries. a credible inflation target is now seen as a necessary condition for macroeconomic stability. the primary factor behind the falling inflation rate is a growing confidence in inflation targeting, which during the years following 1993 gradually affected inflation expectations. in recent years the repo rate in sweden has been lower than the corresponding steering interest rates in the usa, the uk and the emu area. many doubted whether sweden as a small country outside of the euro area would ever be able to live with short - term interest rates lower than those set in frankfurt. however, we have succeeded in doing so for some time. if one looks at the short - term real interest rates now, they are at approximately the same level as in the euro area and sweden, at around 2 per cent. the fact that we in sweden succeeded in achieving a good growth rate during the second half of the 1990s without causing overheating and raised interest rates, was because we started off with a very low level of resource utilisation. following the crisis at the beginning of the 1990s, unemployment was at a record high level and there was considerable unutilised capacity in industry. it was not until recently, since the end of last year, that we have begun to approach the capacity ceiling. furthermore, sweden has shown a positive development in private saving throughout the entire 1990s, and the household sector's burden of debt is currently much lower than it was after the crisis at the beginning of the last decade. in addition, we have a surplus on the current account, which is tantamount to a surplus in the balance for the economy as a whole. things look rather different in the usa. there, private sector saving has declined to – 7 per cent of gdp, the household sector's burden of debt is at a record high level and the deficit on the current account balance is growing rapidly. both american consumers and international investors have had strong confidence in the american economy's capacity to generate future income. usa central point in economic picture when it comes to the actual economic activity situation, interest is mainly focused on the usa, not least because of the low level of saving and the large build - up of debt described above. if american households were to rapidly increase their saving and reduce their consumption, and if foreign investors were to begin