per cent and cpif inflation was + 0. 4 per cent. we have been able to observe that it is a broad - based decline in inflation, to the extent that all major components are affected. 6 low inflation has come to be a widespread phenomenon and many countries and regions have recently reported inflation rates clearly below their targets. inflation has fallen particularly sharply in the euro area. the fact that this happens in a situation where there is plenty of spare capacity – which is the case in large parts of the euro area – is not particularly surprising. however, the downturn in swedish inflation is larger and has been going on for longer than in other countries. and the question is why... one possible reason, which was also discussed in an article in the latest monetary policy report in february, is that swedish companies have not been passing on their cost increases to consumers as much as is normal. 7 they have thus not increased their prices to the extent that one might expect, given the historical relationships with unit labour costs and import prices faced by producers. there may be several reasons for this, but one is that margins may decline when economic activity is weak, which is also noted in the article. current research using us data implies that price mark - ups vary positively with the business cycle. 8 another reason may be that the weak development in the euro area has hit swedish exports hard and that this has contributed to resource utilisation being lower than normal over a long period of time. with low resource utilisation one can expect that inflation will be pushed down as the pressure on wage and price increases will be low. the weak international demand is of course one factor that is beyond the riksbank ’ s control and in this sense monetary policy housing market. in the case of australia, there are no clear signs that they have faced this kind of trade - off during the period following the financial crisis. this is clearer for the period 2002 – 2004, but then inflation stayed within the target interval of 2 – 3 per cent and was only close to the lower interval limit for one quarter. see sveriges riksbank ( 2014a ). see sveriges riksbank ( 2014a ). see nekarda and ramey ( 2013 ). bis central bankers ’ speeches cannot be blamed for the low inflationary pressure. at the same time, it is the role of monetary policy to counteract this type of downward pressure to stabilise inflation around the target. monetary policy may have

structural unemployment cannot be affected by monetary policy. however, my impression is that one can at least partly determine how much of unemployment is structural by looking at wage increases. since the wage increases are small, it is reasonable to assume that there is spare capacity in the labour market. this means there is also scope to use monetary policy to try to reduce unemployment. household indebtedness nevertheless remains high the actual purpose of a monetary policy that leans against the wind is to counteract a buildup of debt that is perceived as risky. when one assesses whether the policy conducted has been appropriate, one wants to know how far one has succeeded in this. in this context, it is important to note that the household debt ratio has remained relatively stable since autumn 2010. in 2010 three things happened that may have affected developments ; the mortgage cap was introduced, the riksbank began to raise the repo rate, and after a period of silence there were suddenly lots of statements and initiatives from the political side referring to the housing market and household indebtedness. 10 it would have been interesting to be able to distinguish the separate effects of these events on indebtedness, but this is of course very difficult. one piece of the puzzle is finansinspektionen ’ s conclusion that the mortgage cap has had an effect. they note in their mortgage report in march 2013 that the mortgage cap is continuing to work and that the loan - to - value ratios for new mortgages are no longer rising. 11 for me as a monetary policy - maker, the decisive question is to what extent monetary policy has contributed to limiting household debt recently. if one looks at the estimates of the determinants of indebtedness used as a basis for our forecasts, one sees that the effect of the repo rate on households ’ debt ratios ( that is, their debts in relation to disposable income ) is very small. 12 a repo rate that is 0. 25 percentage points higher during one year is expected to reduce the debt ratio by at most 0. 3 – 0. 4 percentage points ( see figure 4 ). for example, in november 2010 anders borg warned of the risk that a housing bubble would build up, comparing developments in sweden with those in ireland and iceland, and emphasising the importance of putting an early stop to it ( borg, 2010 ). the liberal party then proposed cutting the deductions for interest payments in january 2011 ( hamilton, 2011 ).