words about the swedish housing market. here, prices have not fallen in anything like the same way as for commercial properties. despite the fact that we are experiencing the severest slump of the post - war period, house prices fell by only approximately two percent during the second quarter of this year compared to the same period last year. house prices in sweden have so far fallen much less than in a number of other industrial countries ( see figure 14 ). several of these countries, for example ireland, spain and the uk, have, however, had a much more ioverheated housing market than sweden. another reason why house prices in sweden have not fallen as much may be that the swedish banks have not been hit so hard by the financial crisis that they have found it difficult to lend money to the households. incomes have also developed positively – at least for those who still have jobs. another important explanation of why house prices have not fallen more is that the real interest rates faced by the households are at historically low levels. the construction of new housing has also been at a low level since the crisis of the 1990s. this is despite the fact that in most of the large urban areas it pays to build new house in comparison to what it costs to buy an existing house. 9 at the moment, when the crisis appears to have bottomed out and optimism has begun to grow, housing prices are beginning to increase again, especially in the major cities. the riksbank will closely monitor developments in the period ahead with regard to both the housing market and the market for commercial properties. the swedish banks can cope with large losses in the baltic states in the deep recession that we are now experiencing, it is not possible to dismiss the fact that the swedish banks are facing significant loan losses. during the first six months of this year, these losses amounted to sek 30 billion, which translated into annual figures is equivalent to 0. 84 per cent of total lending. a large part of these losses, 44 per cent, stem from the swedish banks'operations in the baltic states. the riksbank's assessment in the main scenario of the latest financial stability report is that loan losses are expected to amount to just over 2 per cent of the banks'lending in 2009 and 2010. in a stress scenario that assumes a much worse situation in sweden and in the baltic states, the loan losses could amount to 4. 3 per cent of lending during these two years. almost 40 per cent of these losses in both the main

rate will be set. it may be the case that as a result of the recent turmoil there has been more of a need than usual that the riksbank comments on the course of events, without anticipating the interest rate decision. assessing monetary policy now let us look back and discuss the material for assessing monetary policy, which came about on the initiative of the committee on finance. it is for me quite special this time. this is the first occasion on which the material for assessing monetary policy actually covers decisions that i have been party to. i do not intend to say a great deal about any conclusions in the material in this brief introduction. the point is that it is the committee on finance that assesses us. however, i would like to raise several issues of principle about assessment in general and about assessing monetary policy in particular. these issues have in various ways left their mark on the formulation of the material. for several reasons, it is important that we are assessed. as i mentioned earlier, one reason is that we become more efficient and develop our work methods. monetary policy acts with a lag and must therefore be based on forecasts. if we are to be as proficient as possible in forecasting future developments then we must continuously take heed and incorporate new knowledge, both new theories and everything else that is happening in the economy “ right now ”. one might say that it is similar to navigating with a nautical chart that is continuously being redrawn a bit. but it is not enough to have the latest shipping forecast and an up - todate chart in order to be a skilful skipper. in order to learn just how much the rudder needs to be adjusted in rough seas, one has to learn from experience. hopefully, one becomes more skilful at maintaining one ’ s course each time one has to parry. and, for monetary policy to be as efficient as possible, we must, in the same way, learn from past events. another reason concerns our role as an independent authority. it presupposes that the general public has ample opportunity to insight into our activities and that we are regularly examined. so assessment is important to us – both from an efficiency perspective and a democratic perspective. however, for the assessment to meet these purposes, there are a couple of factors to be taken into account. what can monetary policy achieve? to begin with, the demands – the actual base for the assessment – should be founded on what monetary policy can actually achieve. monetary policy