well. the swedish institute for growth policy studies ( itps ) demonstrates in a study that swedish - owned industrial companies which increased the number of their employees in low - wage countries during the 1990s at the same time increased their demand for labour with higher education in sweden. this is in line with the development that has taken place in the united states and the united kingdom. according to the swedish labour market administration ’ s figures on redundancy notification and itps ’ s media monitoring, few jobs moved abroad as a result of companies transferring their operations abroad during 2005. 4 in total, the number of jobs was 2 000 - 4 000, of which 1 500 involved a move to another eu country. the major challenge for the future probably does not lie in the number of jobs moving abroad, but in managing the transition required to make it possible to create new jobs as new employment is created mainly in other countries / regions / sectors. this demands a good corporate climate and a good capacity to attract knowledge and capital. it requires flexibility in the labour market so that employees can retrain as smoothly as possible, and move to new sectors and new regions. if this is not successful, then structural unemployment could become entrenched at high levels. the labour markets in europe – including sweden – have shown clearer tendencies towards this than in the united states. during the period 1960 - 1999 employment increased substantially in the public sector. since then it has stagnated and it is not likely that it will be the same engine for employment growth in future as it was previously. at the same time, employment in industry is continuing to decline. instead, employment has increased most in the private service sector ( see figure 10 ). the capacity of the labour market to adapt to these changes in demand is of course important. in future, a large part of employment growth will probably be in the private service sector. it will be very important that the labour market functions in a way that enables a smooth transfer to growth sectors. this concerns retraining, localisation of new production and also wage formation. something that one can feel apprehensive about is how the swedish economy will manage an international recession. we are strongly dependent on exports. investment is also increasingly made abroad. i therefore believe that it is important to make it attractive to invest in sweden so that the domestic economy is strengthened. the current account surplus also shows that there would be scope to increase domestic demand, which could increase employment in sweden and alleviate the effect of an

has also become stiffer in many different markets and has contributed to low inflation. it is very difficult to predict at an early stage what is happening in the economy and the riksbank was far from alone in being mistaken in its forecasts. almost all other analysts made similar, or larger, forecasting errors during this period. at the previous monetary policy meeting, the executive board unanimously decided to hold the repo rate unchanged. at the same time, we signalled that there would probably be a need to increase the rate later in the year. growth in the world economy and in the swedish economy is robust and our assessment is therefore that inflation will increase gradually towards the 2 per cent target, reaching it a couple of years from now ( see figures 1 and 2 ). however, this development assumes that the repo rate will be increased, as otherwise inflation will exceed the target. current monetary policy despite the fact that inflation has been clearly below target for some time, the riksbank increased its key rate twice during the winter, by a total of 0. 5 percentage points. perhaps some people may wonder if this was really necessary ; we are still in a situation with high unemployment and we cannot as yet see any inflationary pressures stemming from wages – one of the most important factors behind rising costs / prices in the economy. however, it is not today ’ s inflation that determines whether we shall increase or decrease the interest rate ; it is the future inflation rate. the riksbank ’ s forecasts and decisions refer in particular to inflation a couple of years ahead. we assume that it will take roughly this long before interest rate changes have a full impact on demand and thus on inflation. the riksbank does not wish to achieve an inflation rate of 2 per cent at all costs. this is neither possible nor desirable. there are always disturbances in the economy that cause inflation to deviate from the target level. if we were then to rapidly bring it back to 2 per cent, we would sometimes be forced to change the interest rate to unreasonable levels. this would also lead to undesirable fluctuations in production and employment. we therefore consider carefully what is a reasonable period of time within which to bring inflation back on target. this is what is known as flexible inflation targeting. at present, our forecasts also indicate a fairly rapid growth in employment – the number of redundancies is declining and the number of new vacancies reported is increasing. the number of persons employed increased by just