somewhat weaker than was assumed in december. this is mainly connected with the financial situation in local government. the local government sector as a whole shows a deficit, which must be redressed over the coming years. although the dollar has weakened against the swedish krona, in terms of the tcw index the krona has not appreciated as much. this is mainly because the krona, contrary to many expectations, has weakened against the euro. the most recent national accounts figures and foreign trade statistics also indicate that we have so far been slightly too pessimistic with regard to swedish exports. the most evident cause for concern is the labour market, which has developed more weakly than expected, particularly towards the end of 2003. the strained financial situation in the public sector would seem to indicate weak employment growth for at least the coming year, while the economic upturn will probably only lead to a relatively small increase in employment in the private sector. there is, of course, a risk that the weak labour market will affect households'expectations and consumption propensity ; a risk that we pointed out already in december and which may have been reinforced. the higher the rate of unemployment, the more caution households will probably show when purchasing and consuming. this could in turn lead to a risk of lower growth during 2004. all in all, the view of the demand situation in sweden remains essentially the same as in december ; demand will increase and approach the economy's long - term sustainable level. lower domestic cost pressure the relationship between unit labour costs and inflation is usually fairly clear. thus, when we made a downward revision to the figures for unit labour costs in december, it was not entirely insignificant for the inflation forecast. the background was primarily the signs we saw of an improvement in productivity growth, combined with a weaker labour market. i shall return to the subject of productivity in more detail in a moment. with regard to wage developments, the wage bargaining rounds are currently a central issue. their outcome will have great significance for the rate of wage increase and thereby also to a large extent for inflation in coming years. it is clear that the labour market situation calls for moderate wage increases. unlike the situation prevailing during the two previous bargaining rounds, unemployment has increased and employment has declined recently. nor are there any labour shortages, other than in a few areas. it is also a positive sign that the rate of wage increase has been declining over the past year and that the same applied to expected inflation. given the present low inflation rate,

issue has further implications than such. over the christmas holidays i read a book by the former us treasury secretary robert rubin. 1 he takes up this issue and motivates why he strongly advised president clinton against holding public opinions on monetary policy, advice followed by the president. according to rubin, there is always a risk that the bond market will be affected if there is the slightest suspicion that the central banks'actions are governed by political pressure. 2 i think that the fact that he - with his decades of experience on wall street - brings up this argument and that he does so despite the widespread respect enjoyed by greenspan's federal reserve, shows that the argument cannot be waved aside. one could object that the riksbank's legal independence is greater than that of the federal reserve. on the other hand, the low - inflation regime is relatively new in sweden and our market is also small and influenced to a large degree by external agents, who often lack in - depth knowledge of how our system works. at present, the economic and political developments in sweden are so stable that political manoeuvring of the type we have seen hardly has any effect on the markets, although some concern has been expressed by foreign analysts. however, politicians who enter the discussion with strong opinions in a stable situation should probably reflect over how they might act in future in more problematic situations. rubin also points out that the president was able, by showing a clear respect for the federal reserve's independence, to increase his own credibility and build - up confidence in economic policy in the united states and in the functioning of the financial markets. this is a view i can sympathise with. the question is then how we in sweden should act to ensure that confidence in our total economic policy is as great as possible. essentially, this of course means doing the right things. in our case, ensuring price stability in accordance with our own definition. however, i believe that the ways in which the authorities responsible for fiscal policy and monetary policy cooperate can also play a role here. in this aspect i can see clear advantages in the interplay between government and central bank in the united states and the united kingdom. maintaining mutual respect for one another's tasks, they have a close cooperation to conduct an overall policy that will benefit their country as much as possible. this is a desirable form of cooperation, particularly for small countries and i believe that we in sweden have come a long way towards this since the mid - 1990s.