go on rising at this rate because they would then exceed the room that now looks like being provided by the probable trend for productivity growth. one illustration of this is that in the coming one to two years, underlying domestic inflation will be somewhat above 2 %, though this is countered by downward effects from import prices. in our main scenario we judge that overall inflation prospects are in line with the target one to two years ahead but that und1x inflation will be marginally above the target at the end of the period. with an unchanged repo rate, und1x inflation is expected to be 1. 6 % one year ahead and 2. 1 % after two years. diagram 3. und1x forecast with uncertainty intervals 3. und1x with uncertainty intervals percentage 12 - month change sources : statistics sweden and the riksbank the transitory factors that the riksbank should disregard in the formation of monetary policy are judged to be small in the coming one to two years. moreover, the riksbank considers that the risk spectrum for inflation is balanced. in other words, the risks of inflation being higher and lower, respectively, than in the main scenario are equal. on the one hand, inflation could be lower than in our main scenario if there is a marked correction to american stock markets or if deregulations and trade liberalisation have greater effects than we have allowed for. on the other hand, inflation could be higher if oil prices do not fall at the rate we assume or if the growth of demand, instead of slackening at the end of the forecast period as we foresee, remains strong. the strong economic activity and gradually growing inflationary pressure point to a future need for a further repo rate increase. the timing and size of the increase are considered in the light of, for example, new information and its significance for the riksbank ’ s overall inflation assessment. our current assessment is that in the greater part of the coming one to two years, inflation is expected to be below 2 %. this speaks in favour of leaving the repo rate unchanged for now.

of the swedish economy that remains bright, with good growth and moderate, though rising inflation. external economic prospects have gone on improving. it is above all gdp growth in the us economy that continues to be remarkably positive but it also looks as though growth in the euro area and the united kingdom could be higher than assumed earlier. international consumer prices, however, are not expected to move up to the same extent. less relaxed monetary policies among a number of central banks and growing pressure from international competition are judged to hold external prices back. but partly because the krona is not expected to appreciate quite as rapidly as we counted on earlier, import prices to producers are now assumed to be somewhat higher. on account of strong competition, however, we do not foresee a full pass - through to consumer prices. domestic demand is also expected to be stronger than we foresaw in the december report, notwithstanding the subsequent repo rate increase of 0. 5 percentage points. rising asset prices and increased household wealth are also contributing to the growth of private consumption. moreover, the strong economic activity and good stock market trend should contribute to a favourable development of investment. diagram 2. gdp growth between 1994 and 2002 2. gdp growth 1994 - 2002 average 1994 - 2002 2000p 2001p 2002p sources : statistics sweden and the riksbank ’ s forecast for 2000 - 2002 the riksbank foresees gdp growth rates of 4. 0 % this year, 3. 5 % in 2001 and 2. 6 % in 2002. these are high rates compared with the 1970s and 1980s. by itself, the upward revision of gdp growth implies that unutilised resources in the economy are brought into production more quickly. the strong economic activity points to a higher rate of wage increases in the coming years. at the same time, it is possible that changes in the labour market will hold wage increases down. a growing proportion of wage increases is being allocated locally, for example. moreover, inflation expectations among labour market organisations are still in line with the target. this means that, as we have seen in recent years, a real wage increase can be secured without such a large increase in nominal wages. historically high real wage increases in recent years should likewise contribute to a moderate development of wages. against this background, we judge that the level of nominal wages can move up at an annual rate of just over 4 %. this is marginally less than foreseen in the december report. in the longer run, however, wages cannot