on openness has also had clear consequences. we publish a comprehensive report showing the reasoning behind our interest rate decisions, the riksbank governor attends hearings at the committee on finance and members of the executive board travel around the country taking part in discussions and giving information on the riksbank's work. in studies of central bank transparency, we are regularly ranked among the top few ( figure 6 ). in my opinion, this openness has been a central issue in gradually building up confidence in the riksbank and its inflation target. it is also important to make it possible to regularly examine the riksbank ’ s work in a serious manner. one indication that we are on the right path to achieving a solid monetary policy regime is what happened when urban backstrom announced his resignation in may 2002 and when i myself did the same thing a couple of weeks ago. in neither case were there any significant effects on either the exchange rate or interest rates. of course, i was a little uncertain as to whether i should just be pleased about this. but i think there is reason to be ; it shows namely that we have a monetary policy regime which is stable and not dependent on single individuals. inflation targeting – some thoughts on the future as i have mentioned, the macroeconomic outcome for sweden has been relatively good over the past decade. of course, this does not prevent there being questions worth discussing and much that can be improved. this also applies in the field of monetary policy. an important question in this context is what one can expect from monetary policy. if the expectations are excessive, there is a risk they will lead to the wrong issues being discussed and, if the worst comes to the worst, to political discontent that will undermine the current monetary policy system. reasonable expectations according to the sveriges riksbank act, the riksbank is to safeguard price stability. we have chosen to implement this by keeping inflation at a target level of 2 per cent. the fact that the legislator has been clear that low inflation should be the target for monetary policy and nothing else, such as high growth or low unemployment, is because inflation is the only factor the riksbank can govern in the long term. it is therefore unwise, and perhaps even counterproductive, to give a different impression. for instance, it is worth repeating that in order to reduce unemployment permanently, an attempt must be made to influence the structural component of unemployment, i. e. the component that is not due to fluctuations

the riksbank is a wage - earner ’ s best friend ” clearly shows that something has happened. real wages have grown positively in negotiations that have set out from stable inflation expectations ( figure 4 ). that is not to say that wage formation and the way the labour market functions are perfect. the future is likely to involve even greater requirements for a more productivity - based local or individual wage formation. the vigorous productivity growth has been another positive surprise in the performance ( figure 5 ). at the start of the 1990s there were no indications that this would be the case. why then would the government have appointed a productivity delegation? the firm productivity gains have, of course, been crucial for the increases in real wages. but they also have meant that companies have not needed to hire new staff on the same scale as before, which has contributed to the weak employment growth in recent years. we really do not know why productivity has improved so strongly even if there are a number of hypotheses according to which the it explosion, deregulation and increased global competition are significant explanations. for the riksbank, it is important to understand this better if we are to be able to produce accurate forecasts of inflation. of even greater importance, of course, is to do what is possible through economic policy to ensure that the positive performance can continue. in the long run higher real wages presuppose increased productivity. two problem areas however, not everything has been as positive. labour supply has not developed as well as one might have hoped. there are currently large groups outside of the labour market and employment has increased at a slower rate than is desirable over the past ten years. continued weak growth in the labour supply will mean in concrete terms that the swedish economy will reach its capacity ceiling at an earlier stage and that the riksbank may be forced to raise the repo rate at a lower growth rate than would otherwise have been the case. another dimension of the problem is that the ageing population gives rise to greater expenditure on medical treatment, care of the elderly and pensions, which burden government budgets. at the risk of sounding repetitive, as this is something pointed out by many in the debate, i would nevertheless like to emphasise that the only realistic means of alleviating these effects is for more people to work and pay taxes and for fewer to be dependent on the social welfare system. this area will offer one of the largest challenges to economic policy in the future. another factor that has proved