assumption that the repo rate would be kept unchanged. a year later we can say that economic growth has exceeded both the national labour market board ’ s and our expectations at the same time as the monetary stance has become looser. nevertheless, labour market growth has been weaker. this shows both that forecasters can be surprised by unexpected developments in the economy and that unemployment at present is not chiefly due to insufficient demand for goods and services owing to low growth and tight monetary policy. structural policy measures needed for a better functioning labour market so, the weak employment growth is, in my opinion, not primarily a result of low demand for goods and services in the economy - the economy is growing by between 3 and 4 per cent a year - but instead has to do with the rapid structural change that puts increasingly high demands on the functioning of the labour market. i now intend to touch upon these structural problems. firstly, the employment problem is even bigger than that reflected in open unemployment data. at the beginning of the 1990s the supply of labour dropped at the same time as employment fell, which meant that the decline in employment was not fully mirrored in unemployment figures. it is a common pattern for both the size of the labour force and employment to be correlated with economic activity. when activity weakens, it leads not only to a fall in employment but also to a decrease in the number of people who say that they want to work. this is natural when people know that it ’ s difficult to get a job. but despite historically high economic growth, the employment rate has not recovered since its steep decline in connection with the crisis in the early 1990s. a large proportion of the working age population is still outside the labour force, which implies that there in practice is considerable hidden unemployment in addition to those openly unemployed. furthermore, the fact that open unemployment has not fallen more during the 1990s ’ economic boom indicates that the labour market does not function satisfactorily. another sign that the unemployment problems are structural in nature is the big differences between regions and between occupational categories. in spite of a single monetary policy for the entire swedish economy, unemployment figures in some regions are double those in others, while the proportion of people receiving benefit from their unemployment fund is twice as high in some occupational categories as in others ( see charts 3 and 4 ). these differences seem to remain over long periods, indicating low mobility in the jobs market. another possible indication of such shortcomings is that the same vacancy ratio today is combined with somewhat

of public information : morris and shin ( 2002 ) is actually pro transparency, not con, ” american economic review 96, 448 - 451. very difficult in practice. the step from theory to practice is probably too great in this case, at least for now. the interest rate path an important part of the transparency concerns the central bank ’ s communication of its monetary policy intentions. so, how open and clear should a central bank be with regard to its own assessment of the future interest rate path? i would like to reply " as open and clear as possible ”. and i believe that we at the riksbank work in this way today. but the road to this standpoint has been very long and lined with various requirements and considerations. with regard to the assumption of the future interest rate, central banks use three different approaches. the first is that the policy rate will remain unchanged throughout the forecast period. according to the second approach, the policy rate is instead assumed to follow market expectations. the third approach means that the central bank works on the basis of its own forecast for the development of the policy rate. 4 5 the riksbank has moved away from the first of the three approaches, via the second, to now publish and build its forecasts on the basis of our own view of what we consider to be a reasonable development in interest rates in the future. why did we take this step and why did we not take it before this year? well, the easiest answer is probably that “ everything has its place ”. a solution that at one point in time matches the requirements made of us will perhaps not work at all when conditions change. and the world around us is of course anything but static. then there is also a measure of “ learning by doing ” in this. from unchanged repo rate … up to october 2005 our inflation forecasts were made under the assumption that the policy rate would not change during the forecast period. the advantage of this method was that it illustrated in a simple manner when there was reason to change the policy rate. if the forecasts showed that inflation two years ahead would be lower than two per cent, this was a signal that the interest rate needed to be cut. if inflation would be higher, the interest rate usually needed to be raised. this rule was easy to understand and was therefore a good educational tool. this characteristic was particularly important when the rule was introduced. it was a question of winning back confidence in monetary policy and anchoring inflation expectations around