should govern our choice of future path? we are now in april 2016 and i judge that we have largely succeeded in our efforts. growth has become much higher than expected, although this is not merely due to monetary policy. the trend towards declining confidence in the inflation target has turned around in that inflation expectations have begun to rise again. the monetary policy conducted is far from uncomplicated. in a world of minus rates it is more difficult to assess what impact the interest rate decisions will have on different channels, that is, how the transmission mechanism will work. it is also difficult to assess the stimulation effects of the bond purchases. 2 moreover, the riksbank has been clear that low interest rates increase indebtedness among households in a way that increases vulnerability in the swedish economy. but most of all, i feel that our monetary policy is successful and better than the alternative. the inflation target would have risked losing its role as anchor for pricesetting and wage - formation if we had not cut the repo rate in 2014 and 2015. with regard to my thoughts on going forward, i would like to begin with the monetary policy meeting on 10 february. the report presented then stated that resource utilisation in sweden was assessed to be at a normal level. the members of the board agreed that the important thing for monetary policy is for the trend in inflation to come closer to the target and to avoid weakening confidence in the target. the upturn in inflation is expected to continue to be fitful and there may be surprises along the way. whether, and if so how, monetary policy will react depends on the causes of such surprises and how they are deemed to influence the outlook for inflation. we were also agreed that we shall maintain a high level of preparedness for action, even between the ordinary meetings, in case further measures are needed to safeguard confidence in the inflation target. exactly how tolerant we are with regard to different outcomes may vary somewhat on an individual basis, which is natural on a committee. in my contribution to the debate at the meeting i wanted to say that i now have a greater tolerance for setbacks, in that we now have a more favourable situation in sweden. i do not see this as advocating a new monetary policy strategy for the riksbank. instead i would describe it as a natural consequence of the change in the economic situation and inflation prospects. when the analyses of data point to resource utilisation normalising and inflation showing a trend towards the target, it is

the threat of shortages by ordering more and earlier. this “ bullwhip effect ” [ 1 ] has driven up prices along the pricing chain. at the same time, the fiscal and monetary policy response to the pandemic has succeeded in protecting nominal incomes, thereby supporting a fast recovery of demand when our economies reopened. the resilience of incomes has, in turn, triggered large swings in demand across sectors. during the lockdown period, and thanks notably to e - commerce, consumption was concentrated on durable goods. then, when the economy reopened, we saw strong pent - up demand for services. since the start of the pandemic, the volatility of durable goods consumption has been almost ten times higher than during the preceding two decades, and almost 30 times higher for services. this has led to inflation broadening into both industrial goods and services. today, around threequarters of the items in the core inflation basket have inflation rates above 2 %. the second shock has been russia ’ s unjustifiable invasion of ukraine. even before the invasion, opec + production cuts and capital constraints on us shale producers were restricting energy supply. this resulted in a spike in energy prices which was a major factor in our underestimation of inflation. but the invasion has hugely aggravated the supply squeeze and sent energy prices to extraordinary levels, making it all the more challenging to forecast inflation. european gas and electricity prices are up 105 % and 75 %, respectively, since the months before the invasion [ 3 ], and around 650 % and 450 %, respectively, since the first half of 2021. this surge in energy prices has directly contributed around 30 % to the headline inflation rate since the start of this year and, indirectly, has added to the broadening of price pressures across the economy. in fact, the models used by the national central banks indicate that the indirect effects of higher energy costs are currently contributing around one - third to core inflation. the persistence of inflation collectively, these shocks have pushed inflation a long way from our target. headline inflation – which was negative as recently as december 2020 – has risen by 9. 4 percentage points from its trough during the pandemic to its peak last month. core inflation has risen by 4. 1 percentage points. in the recent past, elastic global supply has meant that shocks to production or energy have dissipated eventually. following the iraqi invasion of kuwait in the 1990s, for example, oil prices fell below their pre - war level