the proposal being based on the executive board ’ s historical behaviour rather than on the staff ’ s perception of what constitutes a well - balanced monetary policy is discussed by hallsten and tagtstrom in the article “ the decision - making process – how the executive board of the riksbank decides on the repo rate ” in sveriges riksbank economic review no. 1 2009 ( p. 78 ). if we members of the executive board consider that there are any special risks that should be examined, then simulations and sensitivity calculations are made for alternative scenarios. simulations are also regularly made with regard to illustrating the effects of conducting an alternative monetary policy. this part of the monetary policy decision - making process is important, as it provides a base for the executive board to be able to choose the decision alternative that appears to provide the best target fulfilment. the staff ’ s proposal for monetary policy is the most important base for the discussion at a longer meeting that includes a large number of analysts from the monetary policy department and the executive board, and which is normally held around two weeks prior to the monetary policy meeting. the financial stability department of the riksbank also plays an important role in the analysis work and therefore takes part in this meeting. the riksbank has always considered it important to monitor developments in the financial markets and in the swedish banks, and this has been particularly important in the forecasting work during the financial crisis. the executive board members ’ input is important at this meeting and may in particular affect the forecast for the repo rate. however, this has repercussions for the forecasting work as a whole, as the future repo rate affects most of the other variables in the forecasts. the executive board may also have views on other parts of the forecasts than the repo rate path, but the discussion usually mainly centres on what is a well - balanced monetary policy. at a shorter meeting that usually takes place the day after the large meeting, the members of the executive board have the opportunity to discuss the main scenario and give their views on it in a more limited circle. the executive board ’ s perceptions regarding the economy and thus monetary policy are then woven in with the other information in the monetary policy reports, including alternative scenarios and updates that provide background material for the monetary policy meetings. the forecasts and the monetary policy decisions the executive board ’ s priorities and perceptions the members of the executive board may have different perceptions regarding many different factors, which affect

our way into a development similar to the american. at the same time, there are similarities, both with regard to the reorientation of the macroeconomic policy and to the penetration of computers and information technology in swedish society. an important difference between usa and sweden is that use of resources in the american economy has been high for many years while the swedish economy was in a downturn for practically the whole of the 1990s. investment usually increases only after a long period of high capacity use. the focus on stable prices and budget consolidation also started later in sweden than in the usa. a very benevolent interpretation could be that we are moving in the same direction as the usa but with some time lag. the usa also waited for a long time for the productive effects of many computers introduced everywhere in the economy. the conclusion that can be drawn now is that it is anyway still not possible to base monetary policy on a real acceleration of potential growth. is consumption affected by increase in wealth? the strong increases in prices in the swedish stock market indicate that there are expectations among those who handle risk capital that profits will increase sharply particularly in swedish it - related companies. in order for such a development to be realised, it is reasonable to assume that investment must increase on a broad front. a risk with a strong increase in share prices before any visible signs of potential growth accelerating is if consumption is strongly stimulated by households who own shares increasing their wealth. an increase in demand that is not corresponded to by an increase in potential growth increases inflationary pressure that the riksbank must counteract by increasing interest rates. however, increased interest rates also subdue increased investment, which is unfortunate, as it would brake the growth of capacity. it has been difficult during earlier periods of large increases in share prices to prove that swedish households have really increased their consumption as a result of increased wealth. during recent years, however, the proportion of households owning shares has increased. when property prices increased sharply at the end of the 1980s, many households raised loans on their homes and used the money for consumption. a low housing production combined with growth that is strongly concentrated to the big city areas has contributed to housing prices again rapidly increasing in recent years. this development can also stimulate consumption with the risks that i have just mentioned. wage formation risks a further factor of uncertainty for assessment of inflationary pressure in the ongoing evaluation of monetary policy is wage formation. here it concerns the risk that the wage formation processes have not yet been tested in such a strong cyclic