date we have published a report on emu ’ s conceivable importance for the swedish krona ; the conclusion was : not much, provided - and it is a major proviso - sweden provides equal conditions in other respects for wealth formation and business enterprise. the krona ’ s part in the assessment of inflation has varied one of the topics in the discussion during the past six months has been how the riksbank reacts to the exchange rate in the formation of monetary policy. we have been accused of being indistinct or dithery during the summer and autumn. first let me say that there is a pattern to this that i find familiar. conducting and interpreting monetary policy is more difficult when the situation is appreciably affected by other factors than resource utilisation, for instance the exchange rate or inflation expectations. the assessments are then more complex and the riksbank faces greater educational challenges. the decisions also tend to be more controversial because there is a clearer conflict between different goals, so that more criticism is only to be expected. our forecasts are always based on a variety of factors. a traditional model for determining inflation in the context of a phillips curve, for example, points to resource utilisation, inflation expectations and the exchange rate as central components. however, these variable ’ s relative importance for inflation changes over time. to illustrate our reasoning over the past nine months, here is a presentation of resource utilisation, our view of international prices and the exchange rate ( diagram 4 ). 4. assessment of growth * and export prices * and the tcw index * percentage annual change tcw index jan - 98 jul - 98 jan - 99 jul - 99 jan - 00 jul - 00 jan - 01 jul - 01 4. 0 4. 0 forecast of growth 2001 and 2002 3. 5 3. 5 3. 0 3. 0 2. 5 2. 5 2. 0 2. 0 1. 5 1. 5 growth forecast 2001 1. 0 forecasts exportprices 1. 4 1. 4 1. 2 1. 2 1. 0 1. 0 0. 8 forecast 2001 0. 8 0. 6 forecast 2002 0. 6 1. 0 growth forecast 2002 0. 5 0. 5 0. 0 0. 0 ir 00 : 4 ir 01 : 1 note. ir = inflation report. ir 01 : 2 ir 01 : 3 0. 4 0. 4 ir 00 : 4 ir 01 : 1 ir 01 : 2 ir

it is that, despite our efforts to the contrary, we seem to have induced many segments of society to believe that we can fulfil the target, if not always then almost so. that is evidently not the case. inflation fluctuates, sometimes a lot. the same seems to apply in most other relatively small countries. compare inflation in, for instance, the individual euro countries with the average rate in the european union. in sweden ’ s case the fluctuations are possibly accentuated by the price - setting being comparatively centralised in some important respects, for instance the labour market and rents. 2. und1x and product groups that fluctuate percentage annual change und1x electricity, telecom, meat, petrol, light fuel oil, fruit and vegetables - 1 - 1 - 3 - 3 ja n95 ju l - 9 ja 5 n96 ju l - 9 ja 6 n97 ju l - 9 ja 7 n98 ju l - 9 ja 8 n99 ju l - 9 ja 9 n00 ju l - 0 ja 0 n01 ju l - 0 source : the riksbank still, there are good reasons for taking a close look at the latest inflation outcomes. the prise rise has come mainly from food and energy but also from telecom prices ( diagram 2 ). in the case of food and electricity, the price increases, particularly during the spring, largely stemmed from factors on the supply side : foot - and - mouth disease, mad cow disease, a relatively dry winter, production problems at oil refineries and so on. it is, in fact, these cpi items that normally fluctuate most. it is not just a coincidence that in canada, for example, the inflation index that primarily guides monetary policy does not include either food or energy prices. the rather large price fluctuations that are a normal feature of these goods and services can be taken to indicate that the recent increases do not constitute a ketchup effect, so that the conditions for a return to a rate in line with the target should be relatively good. not just transitory effects at the same time i definitely do not want to make light of the increase in inflation. even excluding the goods and services i just mentioned, inflation has moved up more than expected and it has done so even though resource utilisation is lower, at least at present, that we counted on earlier. that is the main reason why, in the latest inflation report, we have slightly revised our