crude oil prices do, in fact, turn out to be relatively flat over the remainder of this year. such a flattening of oil prices would reduce headline inflation directly and would diminish the threat of higher energy prices becoming more deeply embedded in the inflation process by raising inflation expectations. and, to date, inflation expectations have been well anchored. as i have already mentioned, it would not be surprising to see some pickup in hourly compensation, but such an acceleration may not add to price pressures. in today's competitive environment, and with profits generally robust, some of the cost increases might well be absorbed in margins. moreover, further productivity gains should act to damp the effects on overall unit costs. like all forecasts, this expectation of stable inflation is only the middle of a wide range of possible outcomes. for example, a further spurt in energy and commodity prices could be passed through into core inflation to a greater extent than seems to have been occurring recently ; the threat of that outcome probably is especially great when the economy is already operating at a high level. if the economy does not moderate somewhat, pressures on resources will increase, further raising the odds of higher inflation. and as i discussed earlier, historical patterns suggest that resource utilization is already in a zone that at times has been associated with the emergence of inflation pressures. but the risks are not all one - sided. price and compensation inflation have, in fact, remained moderate at high levels of resource utilization, despite rapid increases in energy and commodity prices, suggesting that some forces not yet fully identified may be helping to keep them contained. those forces might include robust underlying productivity growth here at home or competition from abroad. it is also possible that the economy could cool more than expected if housing markets weaken quite substantially, consumption is cut back significantly, and as a consequence businesses pare capital spending plans. my job as a policymaker is to work with my colleagues to identify the path of short - term interest rates that has the best chance of realizing that favorable central - tendency forecast of solid growth and continued low inflation. i do not know how much policy firming will be needed to accomplish this objective. my forecast is that the economy is in transition to a sustainable pace of growth, in which case policy likely will be in transition as well. at this juncture, given the apparent strength in demand and the narrowing margin of unused resources, i am focused on making sure that inflation and inflation expectations remain well anchored. a tendency for inflation to move higher

imf gdp growth in sweden quarterly changes in per cent calculated at an annual rate, seasonally - adjusted data - 1 - 1 note. broken columns refer to the riksbank ’ s forecasts in m pr 2008 : 2. sources : statistics sweden and the riksbank employed 1000s of persons, seasonally - adjusted data employed ( ilo - definition ) employed ( eu - definition ) note. broken line represents the riksbank ’ s forecast in the m pr 2008 : 2. sources : statistics sweden and the riksbank unemployment per cent of labour force, seasonally - adjusted data note. broken line represents the riksbank ’ s forecast in the m pr 2008 : 2. sources : statistics sweden and the riksbank inflation ( cpi ) annual percentage change - 1 - 1 note. broken line represents the riksbank ’ s forecast in the m pr 2008 : 2. sources : statistics sweden and the riksbank inflation expectations – 1 and 5 years ahead annual percentage change 1 year ahead, all 5 years ahead, all source : prospera research ab wages, productivity and unit labour costs annual percentage change unit labour costs labour costs per hour productivity - 2 - 2 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 note. broken lines and columns represent the riksbank ’ s forecasts in the m pr 2008 : 2. source : statistics sweden the policy rate in sweden per cent note. broken line represents the riksbank ’ s forecast in the m pr 2008 : 2. source : the riksbank gdp growth in sweden quarterly change in per cent, seasonally - adjusted data 2, 0 2, 0 1, 5 1, 5 1, 0 1, 0 0, 5 0, 5 0, 0 0, 0 - 0, 5 - 0, 5 sources : statistics sweden and the riksbank cpi and cpif annual percentage change cpi cpif - 1 - 1 - 2 - 2 note. the cpif is the cpi with a fixed interest rate. sources : statistics sweden and the riksbank summary the picture presented in july remains largely unchanged, with lower growth and high inflation. but gdp growth has so far this year been weaker than expected. inflation is at its highest since the mid - 1990s. but crude oil and other commodity prices have fallen. at the same time, productivity has been lower, which has led to increased wage costs.