fallen back to under 50 dollars per barrel in august. instead, it rose to new record highs during the summer. it is true that it has dropped somewhat recently but it is still above our previous forecast. even the expected future oil prices, the forward rates, have risen. how the high oil price will affect the world economy and price levels at different stages of production is hard to judge. the effects that can be expected to arise will depend, among other things, on whether the high price first and foremost reflects rising demand or whether it is due to supply shocks. the upturn in the oil price in recent years has been accompanied by an increase in oil production, which indicates that the price increase was mainly due to high demand. mounting demand from countries with rapidly increasing industrial production, such as china and india, has probably played a part. at the same time, it is evident that there have been supply shocks. the conflict in iraq and the recent storms in the gulf of mexico and the southern united states are just a few examples. what is worth observing is that the rise in the oil price, of almost 40 dollars per barrel, since 2002 does not appear to have dampened global growth to any appreciable extent. this can probably be explained in some measure by the fact that the upswing thus partly seems to be a result of the sharp 1 / 4 expansion in asia and by the fact that economic policy has become more expansionary. that the industrialised countries in particular are not as dependent on oil as before should also have contributed to the effects so far being less than in previous oil crises. however, it is also conceivable that the full impact of the supply shocks has not yet become evident on growth and inflation. to sum up, the oil price and its effects on growth and inflation are a significant source of uncertainty that we are grappling with in our assessment of growth prospects and the inflation outlook. low long - term interest rates in the financial markets recent developments have been characterised by a continuation of low longterm interest rates and a stable krona. the low bond yields are somewhat puzzling. even though corporate earnings have continued to increase in line with the continued strengthening of international economic activity, investment in many countries has not picked up to the same extent. while the willingness to invest has been relatively low in industrialised nations, regarded from a cyclical perspective, saving has also been high in certain oil - producing countries and in several asian economies. the combination of

a restrained willingness to invest and a high saving rate could, in other words, have contributed to the low bond yields. in addition, however, interest rates around the world in recent years may have been depressed by more transitory factors such as temporarily low risk premiums, effects of changed rules for pension saving and asian countries ’ build - up of their foreign exchange reserves. a fast rise in bond yields cannot be ruled out when these conditions normalise. that in turn could have repercussions for the real economy, partly through the effect on housing prices, household wealth and consumption. the large deficits on the us current account and federal budget are another element that has long been one of the key risk factors in the international outlook. the question is not so much whether this situation is sustainable or not. there are many reasons to expect that the deficits will shrink in the period ahead. a weaker dollar and higher us interest rates are likely to be natural features of such a development. the concern revolves mainly around how big the changes in interest rates and exchange rates might have to be and how quickly they might come about. domestic demand to take over in sweden like abroad, the swedish economy showed signs of a slowdown around the turn of the year following a high growth rate last year. as regards the swedish economy, too, our assessment in june – that it was a question of a temporary slowdown – seems to have been correct. economic growth seems to have increased over the course of the year. revised statistics have also shown that developments at the beginning of the year were not quite as weak as was first indicated. during the second quarter gdp growth picked up as we forecast in june. one question, of course, is whether we, with the benefit of hindsight, overdid it when we cut the repo rate in june. i don ’ t think so. even though the start of the year did not turn out quite as weak as it seemed in june when we lowered the repo rate, it still appears that economic growth and resource utilisation this year will be markedly lower than we expected at the beginning of the year. in the period ahead we expect that the cyclical upswing to a greater extent will be associated with increasing domestic demand. there are currently a number of signs that such a change is on the way. during the second quarter this year, growth in household consumption seems to have picked up and it appears that consumption continued to grow strongly in the third quarter as well