is to conduct a monetary policy aimed at ensuring that inflation and inflation expectations develop in accordance with our target. this in turn means that the social partners can continue to sign agreements based on the assumption that the inflation target will be met a couple of years ahead. judging from the surveys we make of inflation expectations, monetary policy in this respect has a very high level of credibility. it is the task of myself and my colleagues on the executive board to ensure that this remains the case. 1. inflation differential rel. germany per cent ( 3 month moving average ) - 2 - 4 - 6 source : oecd 2. relative unit labour cost manufacturing industry, index 1970 = 100 ( 3 month moving average ) source : oecd 3. gdp annual percentage change - 1 - 2 - 3 source : the riksbank 4. labour market 3 month moving average 7, 0 unemployment, per cent of labour force ( left hand scale ) employment, thousands ( right hand scale ) 6, 0 5, 0 4, 0 sources : statistics sweden and the riksbank 5. current account and public finances percentage of gdp ( 3 year moving average ) public financial saving current account - 2 - 2 - 4 - 4 - 6 - 6 - 8 - 8 - 10 - 10 sources : oecd and the riksbank 6. hourly wages annual percentage change ( 3 year moving average ) real wages nominal wages - 2 - 2 - 4 - 4 sources : nier, national mediation office

of wage bargaining rounds for more than 2 million employees and the outcome will have crucial importance for the development of inflation and thus monetary policy. the assessment in the december inflation report was that the swedish economy would show a recovery towards the end of the year, following a relatively mild downturn in economic activity. we envisioned a still relatively strong labour market. however, employment was expected to fall slightly to begin with, before slowly showing an upturn once again. the strained economic situation among a number of municipalities and county councils meant that we assessed it to be difficult for the swedish municipal workers'union to achieve any further far - reaching wage increases for its members. it was estimated that, all in all, the demand situation would have a subduing effect on wage demands and we thus did not expect to see any major contagion effects in the 2004 wage bargaining rounds from the early termination of the municipal workers'union's wage agreement. we did not find reason to make any fundamental changes to these assessments at the beginning of february, when we had our most recent monetary policy meeting. wages comprise only part of the total costs for labour among companies ; on top of these come costs for negotiated and legislated employer contributions, various types of fringe benefits and shorter working hours. as it is the total wage cost that is important to inflationary pressure, it is also necessary to make an estimate of all of these factors. the assessment in the inflation report was that the wage costs for the economy as a whole would increase by just under 5 per cent this year and just over 4 per cent next year. it was also assumed in the forecast that productivity growth would recover after a decline in 2001 and approach the more normal, trend level. however, it was also observed in the report that there was a risk that wage cost increases in coming years could be higher than this figure of 4 - 5 per cent. at our meeting in february we saw no reason to make any appreciable change to this assessment. the newly - received statistics on wages and prices have not reinforced the upside risk. the national accounts for the third quarter of 2002 and the revisions for earlier quarters made by statistics sweden indicate that productivity growth last year may have been slightly higher than we anticipated. in addition, the outcome in the short - term wage statistics showed lower increases than expected in the central government sector. however, the local bargaining rounds are not yet complete and retrospective revisions will be made, so the statistics should still be interpreted with caution.