last week, on 20 march. there has been a spate of negative news about the global economy in general and certain companies in particular and international stock markets have remained turbulent. us economy difficult to assess the focus at present is on the u. s. economy. its future path is highly important for economic developments in sweden. in order to arrive at a clear picture of the situation, we need to judge the effects of alternative outcomes. during the 1990s the united states experienced its longest economic upswing ever without any serious signs of accelerating price and wage increases. a more efficient economy, with strong competition and functional product and labour markets, accompanied by advances in computer and telecom technology, are said to have contributed to a higher rate of potential growth. even so — or perhaps as a consequence of this — the euphoria led to growing imbalances. the rapidly rising stock markets in the late 1990s seem to have stemmed from unduly high expectations of future profits and incomes. partly in view of equity capital ’ s appreciation, households stepped up their expenditure on consumption in excess of current income. corporate investment expanded rapidly to meet the growing demand. high share prices stimulated the procurement of venture capital and generated a plentiful supply. the growth of demand and the expansion of the u. s. economy ’ s supply side were proceeding at a rate that was based on expectations that simply could not be fulfilled. american households pledged future incomes for current consumption to such an extent that their savings no longer sufficed to finance corporate investment. the saving deficit grew, as could be seen from the rising deficits on the current account, and large amounts of capital had to be imported. the apparently unending increase in expectations of rising share prices on u. s. stock markets stimulated the capital imports, which continued to such an extent that the dollar rose to high levels against other currencies. together with massive investments in real capital, which involved considerable rationalisation, the dollar ’ s appreciation held back the price impulses that normally accompany growing pressure from wage costs. the question is whether the upward phase in the u. s. economy in the 1990s represents a cyclical pattern that differs from earlier post - war cycles. in the past, rising demand led in time to growing tensions as the supply side became increasingly strained and this resulted in higher inflationary pressure. rising inflation normally functioned as a warning to decision - makers that a tighter economic policy was called for. the latest upward phase seems, however, to have been

path for the swiss economy. the output gap – i. e. the gap between normal and actual utilisation of resources – will diminish. monetary development alongside the figures for the real economy, movements in monetary and credit aggregates also indicate that economic recovery is underway. since adopting a resolutely expansionary monetary policy three years ago, mortgage lending has grown at an annual rate of over 5 %. we continue to monitor developments in the real estate market closely. since september, other loans have also recorded positive rates of growth with respect to year - back figures. in the past, a development of this kind usually indicated a strengthening in economic recovery. the economy is well supplied with liquidity as a result of the expansionary monetary policy. although the growth of the broadly - defined monetary aggregate, m3, had fallen to 1 % in october 2004, it has since climbed back to over 6 %. however, excess liquidity will be gradually reduced as a result of the interest rate increase announced today. in this way, we aim to ensure that price stability is not endangered in future. the monetary policy decision the economic and monetary situation has developed in the way we anticipated. the inflation outlook prior to today ’ s decision was largely in line with the figures presented at the last monetary policy assessment. for 2006, however, we forecast a slightly higher level of inflation to that presented in the last assessment. this is due to revisions made to certain figures that point to a higher rate of utilisation in the economy. in view of this inflation outlook, what is the justification for our decision to increase the target range for three - month libor by 25 basis points? while we anticipate falling rates of inflation next year, this decline is not relevant in terms of monetary policy. recent inflation levels of over 1 % are probably largely due to the rise in oil prices which began in the first half of 2004. at the time, we decided not to take this increased inflation into account in our monetary policy decisions, due to the fact that its consequences could not be neutralised through monetary policy measures. it seems logical, therefore, not to take account of a decline in inflation attributable to subsiding oil prices, particularly since this drop also results from a statistical effect. a number of inflation components are likely to persist at a low level, even in 2006. we are working on the assumption that the prices of imported products will continue to fall, due especially to the continued pressure ex