and the united states. however, it is clear that the european union is still the most important export market for these countries, which means that weak economic development in europe will have significant consequences for growth prospects in china and india too. so, even if increased trade with the more rapidly growing markets in the bric countries may boost sweden ’ s export industry somewhat, we can also expect negative thirdcountry effects from a slowdown in the united states and the euro area. financial channels however, it is not only through trade that sweden is affected by weaker economic development abroad. we are also affected through the financial markets. these markets have become increasingly interlinked, which is illustrated not least by the recent turbulence on the stock market. as figure 6 shows, share prices on the various stock markets are highly correlated. share prices have fallen on the stock markets of the world recently. however, the fall has been particularly substantial on stockholmsborsen, which has fallen by 21 per cent since the turn of the year, while the dow jones index and s & p 500 index have fallen by 1 and 4 per cent respectively. the swedish households ’ holdings in shares in companies listed on swedish market places have increased by over 475 per cent since the early 1990s. 4 this means that the fall in share prices entails a reduction in wealth, which has a certain restraining effect on swedish household consumption. this in turn has an impact on growth and employment as household consumption, adjusted for its import content, constitutes around 35 per cent of gdp in sweden. for swedish companies, falling share prices in sweden and abroad thus this relates to an increase from over sek 100 billion to over sek 577 billion ( statistics sweden, 2011 ). bis central bankers ’ speeches have negative effects on both domestic and foreign sales. falling share prices also make it more difficult to fund investments by issuing new shares, which reduces capacity utilisation. figure 6 share indexes and swedish consumer confidence in the economy the stock market index january 2006 = 100 sweden ( omxs ) euro area ( eurostoxx ) usa ( s & p 500 ) emerging markets ( msci ) consumer confidence - 10 - 20 - 30 note. the left axis is the stock market index and the right axis the value of the households ’ confidence indicator. sources : reuters ecowin and the national institute of economic research households ’ and companies ’ expectations of the future it is assumed that movements on the stock markets reflect the market participants ’ expectations regarding profits in the

with regard to the question of risks linked to households ’ current debt is that it does not appear possible to prove that they are a threat to financial stability or to the macro economy. but this is not the main reason why i say that monetary policy should not be used to limit household debt – the main reason is that monetary policy and the policy rate are unsuitable for this purpose. see, for instance, financial stability report 2012 : 1. bis central bankers ’ speeches why more expansionary monetary policy? a well - balanced monetary policy is normally a question of finding an appropriate balance between stabilising inflation around 2 per cent and stabilising the real economy around a sustainable path. the real - economy indicator that in my opinion is the most appropriate to focus on is unemployment. 22 monetary policy should thus try to stabilise unemployment around the rate that is assessed as sustainable in the long run. how well are the targets met? inflation is currently very low. in october, cpi inflation was 0. 4 per cent. according to the riksbank ’ s forecasts it will be below one per cent as an annual average in both 2012 and 2013. however, cpi inflation is affected by the riksbank ’ s repo rate changes and the cuts in recent years have contributed to the low cpi inflation. but cpif inflation, which gives a better picture of inflationary pressures in periods of large interest rate adjustments, will be around one per cent as an annual average in 2012 and 2013. thus, inflation is far below the target, whichever measure one uses. according to the national institute of economic research ’ s assessment of the swedish economy in august 2012, both cpi and cpif inflation will be well below the target in both 2013 and 2014, despite the forecasts assuming a much lower reporate path than the riksbank ’ s. 23 sweden has the lowest inflation in the european union. what about developments in the real economy? the outlook is poorer than before for both the world economy and the swedish economy. swedish exports have slowed down substantially and growth is now expected to be weaker. unemployment is very high, 7. 8 per cent in september, when seasonally - adjusted, and moreover it is rising ( figure 5 ). this means that unemployment in sweden is as high as that in the united states and almost as high as in the united kingdom ( 7. 9 per cent ). at the same time, unemployment is much lower in other countries that should reasonably be comparable with sweden,