over the last three years, averaging approximately 5 per cent per year ( figure 21 ). in addition, the swedish krona weakened during the financial crisis, pushing up import prices. in turn, the rapid increase of unit labour costs over the last three years is primarily due to the fact that productivity fell for three years in a row, in addition to which hourly wages increased more during that three - year period than during the immediately preceding three - year period. this development will be reversed during the forecast period. we expect largely unchanged unit labour costs over the next three years due to low wage increases and rising productivity. we also expect the swedish krona to continue to strengthen ( figure 22 ). this will mean that inflationary pressure will be low during the forecast period. repo rate at all - time low at the monetary policy meeting in december, the riksbank decided to maintain the repo rate at the all - time low of 0. 25 per cent, standing fast by its previous assessment that it will not be necessary to raise the repo rate until the autumn of 2010 ( figure 23 ). the background to this decision is that a low level of resource utilisation, together with a slow development of prices and wages, is expected over the next three years. in order to meet the inflation target and to support economic recovery, the repo rate must remain low for a long time. this is the same repo rate path that we adopted as long ago as july. since then, the forecasts for gdp growth and employment have certainly been revised upwards. the forecast for resource utilisation has accordingly been revised upwards. however, at the same time, the forecasts for inflation have been revised downwards. these two changes largely cancel each other out as regards their effect on monetary policy. wage formation has functioned well for more than a decade wage formation has functioned well over the last ten to fifteen years. the development of wages has been compatible with low and stable inflation. since the inflation target was adopted in 1995, cpif inflation has averaged 1. 7 per cent per year, seldom dropping below 1 per cent or rising above 3 per cent. this is a significant change when compared with the high and sharply fluctuating inflation we experienced in the 1970s and 1980s. the changes made to the frameworks for wage formation are an important factor behind the lower and more stable inflation we see today. i am primarily thinking of the industrial agreement implemented in 1997, but also of similar but less far -

rising to approximately 10 per cent. likewise, in the euro area, the situation in the labour market has continued to deteriorate and unemployment has increased to approximately 10 per cent. an expected weak growth in wages together with low inflation expectations is contributing towards dampening inflation. falling market expectations for the policy rate during the autumn may also be compatible with lower expected inflationary pressure. both survey results and implied forward rate curves indicate that market participants ’ monetary policy expectations in the united states and euro area have fallen somewhat during the autumn. sweden also experiences recovery but low resource utilisation developments in the rest of the world have impacted small, open, export - dependent countries such as sweden hard. however, even in sweden, the lowest point of the recession has been passed and recovery has started. gdp increased slightly during both the second and third quarters of 2009, after having previously fallen four quarters in a row. the national institute of economic research ’ s economic tendency survey and swedbank ’ s purchasing managers ’ index have also reached levels indicating growth in the swedish economy ( figure 10 ). in the most recent monetary policy update, from december, we saw ahead of us fairly strong gdp growth for this year and the next two years ( figure 11 ). gdp is expected to increase by an average of just over 3 per cent per year during the years 2010 – 2012. swedish exports will also increase at the same rate as economic conditions in the rest of the world improve. despite the weak development of incomes, private consumption is expected to continue to rise over the forecast period, due to increased optimism regarding the future. investment is also expected to contribute towards gdp growth during the forecast period – first housing investment and public investment, and then also investment in the business sector. however, despite this growth in gdp, the economy will take a long time to recover. gdp is not expected to return to its pre - crisis level until 2011 ( figure 12 ). as a consequence, resource utilisation will be low during the forecast period. the labour market will also remain weak during the entire forecast period. employment is expected to continue to fall this year, but to increase again next year ( figure 13 ). unemployment will amount to approximately 10 per cent by the end of the year, but will then decrease over the following two years ( figure 14 ). the most recent labour force surveys indicate a slightly better development than we expected in december. the manner in which this may affect the forecasts is a matter we will return to