changes in employment often occur somewhat later in the economic cycle than changes in other variables, such as growth. this is illustrated in our forecasts for the repo rate and unemployment presented in the february monetary policy report. it is important to remember in such a situation that monetary policy is forward - looking and that its primary task is to create good long - term conditions for the economy by maintaining price stability. let me illustrate this by means of two monetary policy episodes. ” too low ” versus " too high ” inflation the last time the repo rate was very low, with a lowest point of 1. 5 per cent, was in 2005. inflation was then below target and the riksbank received criticism from various parties for not cutting the repo rate further. sweden was on its way into an economic upturn, but the labour market was nevertheless relatively weak. there was a lot of talk about " jobless growth ”, that is, growth that does not create employment. some said that the reason more jobs were not created was that monetary policy was too tight. the riksbank made a different assessment. the view of the executive board was that it was underlying factors on the supply side, such as productivity, increased competition in the food sector and low - price imports from emerging economies that were decisive for the low inflation and employment. none of these factors would have been affected by a repo rate cut. the executive board ’ s assessment was that monetary policy was sufficiently expansionary given the demand situation and they pointed to the fact that credit volumes and house prices were increasing at a rate that was not sustainable in the long run. they therefore began to raise the interest rate in january 2006, a little sooner than if they had merely given consideration to the inflation target. the riksbank had no target for either credit volumes or house prices. but these were variables that might be expected to affect inflation and the real economy. if the credit volume and house prices had continued to rise rapidly this would have risked triggering larger adjustments further ahead. one reflection that can be made here is that if the interest rate had been cut even further in 2005, which was suggested by several outside of the bank, the current situation might have been worse. there would probably have been a larger credit expansion and higher house prices that would have needed to be adjusted later. this could have put our economy in a much more vulnerable position and thereby worsened the current economic downturn. another experience is from autumn 2007, when energy and food prices

of the economy. in the last few years, the growth of the american economy has surpassed most forecasts. not only has the rate of growth been high in historic terms during the present upswing - around 3. 5 % per year on average since the end of 1991 - it has besides been very stable and unusually long lasting. at the same time, unemployment has fallen to near 4 % ; levels this low have not been witnessed since the 1960s. however, in distinction to previous booms, there has been no increase in the rate of inflation and the underlying rate of inflation has been more than halved since 1991, from over 4 % to 2 %. public finances have improved considerably, from a deficit of 5 % of gnp in 1991 to an expected surplus of around 1 % this year. looking at productivity per hour worked in american business, which is perhaps the best measure of how good a country ’ s growth potential is in the longer term, this has risen sharply, by over 2. 5 % on average since 1997 ; this figure can be compared with an average growth of productivity of around 1. 5 % over the period 1974 - 96. a substantial part of the improved productivity of labour can be explained by very high investments - so - called “ capital deepening ” - not least in computer equipment. in spite of the fact that unemployment has continued to fall throughout the period, the growth of productivity has been impressively high. this is remarkable considering the fact that the new jobs have principally been created in the service sector, where productivity generally increases at a lesser rate than in manufacturing. three principal groups of reasons for the positive trend in america can be distinguished. one important reason behind the upswing appears to be good economic policies. since the beginning of the 1990s, fiscal policy has been directed towards achieving a balanced budget, and for a year or so now the budget has been balanced. in order to achieve this, taxes have been raised, expenditure diminished and budgetary procedures made more stringent. monetary policy has been directed towards keeping inflation low and stable and has succeeded in warding off both destabilising inflationary and deflationary pressures at an early stage. the policy mix of monetary and fiscal policy therefore appears to have been favourable. a number of structural factors seem to have been important. deregulations in many sectors and increased globalisation have intensified already tough competition and increased the pressure on the partners on the labour market, leading to greater flexibility in the labour market and enhancing