per cent. at the most recent monetary policy meeting on 3 may we decided to keep the repo rate unchanged. at the same time, our assessment was that the repo rate will need to be raised gradually, which we had also assumed earlier. now we believe that it will need to be raised more than was anticipated in february. this is necessary so that inflation will develop in line with the target. the main reason why we need to revise our forecast upwards is the outcome of this year ’ s wage bargaining rounds. the central wage agreements have been slightly higher than we had earlier had reason to believe, given that unemployment is still quite high in sweden. some forecasters have believed in a higher interest rate path than we have predicted. however, this does not appear to be because their forecasts for wages or fiscal policy have differed substantially from those made by the riksbank. i would also like to point out that so far there are no dramatic differences in our picture of current economic developments today compared with february. we will return to this in the monetary policy report to be presented in june with a more detailed account of how we view the situation. own interest rate forecasts when we expressed our views in february regarding the future development of the interest rate, it was the first time we presented our own assessment of the future repo rate path. by this we mean that we try to calculate what we believe will be a well balanced monetary policy over the coming years. previously we presented forecasts for the economy on the basis of what the financial market participants believed about the repo rate. now that we are presenting our own interest rate path it will be clearer both what we believe about the interest rate and what we believe about the economy in general. we consider this to be a major step forward in the riksbank ’ s way of explaining how monetary policy functions. for most people i believe it is more important to have an idea of the development of the interest rate over time, rather than to know what an individual interest rate decision will entail. in this context i always try to be as clear as possible. the interest rate path is merely a forecast, not a promise. the economic conditions on which we base our forecasts are constantly changing. changes are constantly taking place in the economy, which means that we have to reconsider our opinions of future developments. the interest rate path represents nothing more nor less than the best assessment we were able to make at the time it was published.

riksbank ’ s particular responsibility. the riksbank ’ s objective is to maintain inflation at around 2 per cent a year. we measure inflation as a change in consumer prices. last year inflation was over 1. 4 per cent. over the past twelve months the main contribution to the increase in the consumer price index, or cpi, came from increased interest costs. however, higher electricity prices, rents and food prices also contributed to the increase in price levels. price reductions on post and telecommunications had a dampening effect on inflation, as did falling prices for computers, dvds and tvs. cpi is affected by technological changes, making it cheaper to make phone calls and to use the internet. inflation is also affected by the changes that come under the designation of globalisation, and that lead to increased trade and competition and to, for instance, cheaper imports of tvs. during the first three months of the year, inflation has not been as low as expected in the forecast made in february. this is mainly because energy prices have been slightly higher than calculated. in february we believed that cpi would be 1. 5 per cent in march. instead it was 1. 9 per cent. higher costs lead to higher prices one explanation as to why inflation is expected to rise in future is that growth in productivity – how much is produced per hour worked – is slowing down. at the same time, wages are rising slightly faster than they have done in recent years. all in all, this means that companies'costs are rising more quickly. it is difficult to say when a higher rate of increase in costs will lead to a higher rate of increase in prices. many swedish companies are currently making large profits and can probably manage a period with higher costs without raising their prices. there are also other factors holding back inflation. for instance, prices of many imported good are continuing to fall. better understanding productivity inflation has been below target since the beginning of 2004, but we can now see that it has begun to increase again. the low inflation can largely be explained by the surprisingly strong productivity. over the past fifteen years sweden has had higher productivity growth than many other industrial nations, including the united states. productivity is important for the development of inflation in the slightly shorter term. if productivity rises quickly, wages can increase without the companies ’ costs rising. high productivity growth thus leads to low inflationary pressure, all other things being equal. we still know too little about what lies behind the strong productivity growth. there are many indications