but also at twelve months. if economic developments should prove to be much worse than we are now predicting, there may be reason to proceed with more unconventional measures to support the economy. one possibility is to do as they have in a number of other countries and purchase government, mortgage and corporate bonds. we are currently examining the experiences of other countries and analysing the advantages and disadvantages of this type of measure. for instance, we need to consider to what extent it is the riksbank that is best suited to carry out this type of measure and whether it might instead be a task for a government agency. summary i would like to summarise my speech as follows : resource utilisation is falling rapidly and is at an unusually low level. all of the measures of resource utilisation that we have provide the same general picture. but it is difficult to ascertain how low it is and when it will turn around. different measures paint different pictures on this issue. the gdp gap implies that resource utilisation will fall to minus 4 - 5 per cent at the beginning of 2010 before it turns around, and the employment gap points to resource utilisation falling to minus 3 per cent in 2011 before the labour market begins to improve. however, in both of these cases the measures are based on very uncertain estimates of the available resources in the economy. it is also difficult to ascertain what consequences the low resource utilisation will have for inflation and monetary policy. the assessment we made at the most recent monetary policy meeting was that the policy rate ought to be cut to 0. 5 per cent. with this cut and the low level of the policy rate that we envisaged, resource utilisation would show an upturn and underlying inflation would be close to two per cent during the forecast period. if developments were to prove much more negative, there is a possibility to proceed with more unconventional measures. figure 1. gdp gap sek million and percentage deviation from hp - trend respectively, seasonally - adjusted data 1 000 000 gdp ( left scale ) hp trend ( left scale ) gdp gap ( right scale ) 900 000 800 000 700 000 600 000 500 000 400 000 - 1 300 000 - 2 200 000 - 3 100 000 - 4 - 5 note. trend calculated using the hodrick - prescott filter. broken lines refer to the riksbank's forecasts. sources : statistics sweden and the riksbank figure 2. flexprice gap percentage deviation from

. there are two explanations for this. firstly, the connection between resource utilisation and inflation is weaker now than before. i mentioned this in my introduction. and this is probably because a changeover to a credible monetary policy that is aimed at stabilising inflation will lead to the connection between resource utilisation and inflation weakening. stable inflation expectations close to the inflation target quite simply provide less scope for other variables to affect inflation. 4 but the connection is not negligible. the expansionary monetary policy in the world as a whole, the large gdp growth in the world during the years 2004 - 2007 and the increasingly high resource utilisation finally led to substantial rises in energy, food and other commodity prices in the world market, and thereby also to rising consumer prices. the forecasts now being made both by international organisations and by ourselves indicate that inflation in the world over the coming years will be positive, despite the low resource utilisation, but slightly lower than was normal a few years ago. the other explanation as to why inflation in sweden is remaining close to the target despite the low resource utilisation is that there are other factors than resource utilisation which exert upward pressure on prices. one such factor is that unit labour costs have been increasing by around 5 per cent a year during the period 2007 - 2009. slightly higher wage agreements, but above all falling productivity, have contributed to pushing up unit labour costs, something that will change in the future as companies reduce their workforces. another factor that is underpinning inflation is the weak krona. given this, the assessment i made at the most recent monetary policy meeting was, as i recently mentioned, that there was no reason to worry about either deflation or high inflation during the forecast period. resource utilisation is not so low that it could lead to deflation, but it is sufficiently low to prevent inflation from becoming too high. the second question i would like to take up is the limits for stabilisation policy. there are limits as to what stabilisation policy can achieve with regard to alleviating the consequences for the swedish economy of such a powerful and global economic recession as the one we are undergoing. for fiscal policy the limits are set by what is considered compatible with a long - term sustainable development in public sector finances. monetary policy is to some extent limited by the fact that there is a floor under which the repo rate cannot be cut. it is not possible to avoid an international economic