long period of time without inflation accelerating in the usa was regarded by many as the revenue from breaking earlier economic ties. low inflation expectations and a high level of confidence in the central bank ’ s capacity and willingness to maintain price stability also created favourable conditions for future growth. confidence in the us economy was further strengthened by the positive development in public finances. the optimistic expectations for the future - which were expressed in rising share prices and growing wealth - also increased households ’ willingness to consume durable goods. together with the strong rise in investment, this led to a large expansion of credit. many it companies were able to find cheap financing on the risk capital market, but despite this indebtedness increased markedly among both households and companies. this development was reflected in the rapidly increasing deficit on the current account, which was entirely due to a reduction in saving in the private sector. the financing of the current account deficit was mainly achieved through a greatly increased capital inflow from foreign investors ’ purchases of us shares. demand for us capital was so extensive that the dollar continued to rise in value, despite the growing deficit on the current account. in winter last year, however, the trend on the stock exchange was broken and the air slowly went out of the it bubble. when raised interest rates and high oil prices reduced household purchasing power and demand during the autumn, company profits also began to decline. falling profits and a high burden of debt contributed to subduing investment and the downturn in the us economy became fact. with hindsight, one can wonder how so many people could be so sure that we had left the whole story behind us and entered a new world. however, we will probably make the same mistake again. let me just remind you of the first “ it bubble ” at the beginning of the last century, which concerned wireless telegraphy. 150 companies were introduced onto the new york stock exchange in 1901 and early 1902. in 1907, only one of these still showed a profit and paid dividends, and even that company had halved its market value since its introduction. similar development in sweden the development i have outlined applies first and foremost to the usa until the end of last year, but many parts of the description also fit the swedish economy. here, our gdp growth had exceeded 3. 5 per cent for three years at the start of the year. the it and telecom sectors ’ large share of swedish business contributed to a more rapid economic growth in sweden than in many other european countries. many people claimed that

november and december the riksbank therefore reduced the repo rate from 4. 10 to 3. 40 %. the early months of this year were marked by continued repercussions of the asian crisis in the world economy, with weaker international demand. in order to prevent this from leading to a dampening of economic developments in sweden and an even lower rate of inflation, in february and march the riksbank reduced the repo rate in two more steps to 2. 90 %. since then the situation has stabilised. an easing of monetary policy in many parts of the world as well as in sweden has been an important factor behind the better tendencies in recent months and the more positive forecasts. even though the statistics show a stronger economic trend, inflation has been in line with the riksbank ’ s forecasts. for this reason the repo rate has been kept unchanged since march. in august the 12 - month rate of cpi inflation was 0. 6 % and inflation ’ s underlying rate, measured by undix, was 1. 5 %. it is changes in indirect taxes and subsidies, together with house mortgage interest expenditure, that are continuing to result in an underlying rate of inflation that is higher than cpi inflation. economic prospects from 1999 to 2001 we are now moving into a period of strong growth, externally as well as in sweden. as regards the international picture, the riksbank judges that annual growth in the oecd area up to the end of 2001 will amount to not quite 2. 5 %. it looks as though effects of the asian crisis are now dying away and that emerging market growth will become stronger in the next two years, above all in the crisis - hit countries in southeast asia but to some extent also in latin america and eastern europe. in japan, too, the earlier risk of negative growth has turned into cautious optimism about an upturn. prospects for the euro area have likewise improved, with a recovery in manufacturing and stronger consumer confidence. in the united states there seems to have been a further extension of the upward phase this year and a slowdown may be softer and more cautious than anticipated earlier. even with stronger international growth, external price pressure is likely to be weak. for one thing, after the asian crisis there is still some unutilised capacity on the whole in the global economy. other factors are increased price competition and an expected appreciation of the krona. economic prospects in sweden also look brighter. besides the positive cyclical signals from abroad