households more sensitive to changes in interest rates. the low inflation is motive for lower interest rates – indebtedness must mainly be managed within other policy areas as on so many previous occasions in recent years, the monetary policy balance in july concerned balancing the low inflation against the high household indebtedness and the risks this entails. for an in - depth description of the risks linked to household indebtedness in sweden, see for instance, alsterlind jan, ulf holmberg, kristian jonsson, bjorn lagerwall and jakob winstrand, “ risks to the macro economy and financial stability arising from the development of household debts and housing prices ”, council for cooperation on macroprudential policy ’ s memo 6, sveriges riksbank. one can read more about this in, for instance, the article “ financial imbalances in the monetary policy assessment ” in the account of monetary policy 2013, sveriges riksbank. bis central bankers ’ speeches however, there was agreement among the executive board on the need to cut the repo rate to bring inflation up to the target within the forecast period. although the economic prospects look fairly good, inflation is too low, and has moreover been lower than expected recently. our assessment is that inflationary pressures will be lower in the coming period, too, compared with the assessment made in april ( see figure 10 ). 7 a further factor that i mentioned earlier, is that policy rates abroad are expected to be lower ( see figure 2 ). when the policy rate is higher in sweden than abroad, the krona exchange rate tends to strengthen, which contributes to lower inflation through lower import prices. all else being equal, lower policy rates abroad therefore imply that interest rates in sweden will also be lower, so that the krona does not strengthen too much ( see figure 5 for the latest forecast for the krona ). all in all, these factors clearly indicated that the repo rate and repo - rate path should be lowered in july ( see figure 11 ). as you know, i entered a reservation against the decision to cut the repo rate by 0. 5 percentage points and advocated a smaller cut of 0. 25 percentage points, and to wait until 2016 before making the first policy rate increase. there are several reasons for this. firstly, i consider that the smaller repo - rate cut entails a better balance between bringing inflation up towards the target and taking household indebtedness into

outlook is instead somewhat weaker. for sweden, it seems likely that the economy will experience a rather normal recovery next year. consequently, it is also probable that inflation a couple of years ahead will be close to 2 per cent, roughly as forecast by the riksbank in august, even if inflation in the forthcoming year may be lower. long - term perspective before rounding off, allow me also to touch upon the longer - term perspective. over the last decade, the economic policy debate has largely centred on stabilisation policy. the fact that stabilisation policy was in focus during the first half of the 1990s is easy to understand. following a severe crisis caused largely by mistakes in stabilisation policy, we changed our exchange rate regime and altered the focus of both our monetary policy and fiscal policy. in the emu debate, it has been natural to continue the discussion of monetary policy and exchange rate systems. i, at least, believe that this discussion went a bit too far. it was easy to get the impression that welfare in sweden depended solely on the riksbank's actions. this is not the case of course. the objective of monetary policy over the past ten years has been to ensure price stability. this has proved rather successful - inflation is in line with the riksbank's target and it is important therefore that it lays a solid foundation for growth. but when we alter interest rates, it is mainly with a view to affecting demand around a long - term output trend. while this is important, it must be remembered that we do not affect the trend itself. and it is this trend that determines our welfare! so we must now shift our focus in the public debate from monetary policy and stabilisation policy to issues that determine sweden's ability to create growth and welfare. in fact, this has been important for a long time since sweden suffered a considerable decline in welfare terms relative to almost all other countries, especially during the 1970s and 1980s. but it is particularly significant now in the light of the challenges facing us in the near future, particularly as a result of our ageing population. essentially, economic growth is determined by how much we work and how productive we are. nothing can change this. the number of hours worked is affected by a large number of factors ; e. g. the number of people of working age, the number of these that are employed, absenteeism, etc. labour productivity, measured as gdp per hour worked, is partly dependent on