example. in practice this approach has often led us to focus our monetary policy analysis and discussion on the inflation measure und1x, as there is generally always reason to disregard the effects on inflation of indirect taxes and subsidies as well as of changes in interest rates. in some situations we have also decided to study inflation measures from which other price changes have been excluded, e. g. in spring 2001, when the prices of a number of goods such as electricity, heating oil, petrol, telecommunications and different kinds of food rose ; and 2003, when it was primarily fluctuations in electricity prices that had a very sharp impact on inflation for a period. inflation and inflation expectations in line with the target the result of the bank ’ s policy can be illustrated in different ways. let me begin with the most obvious gauge, the inflation outcome. if we start with the date that was set in the original decision – the beginning of 1995 – cpi inflation up to today has averaged 1. 4 per cent. if we instead go back to january 1993, when the new policy was announced, the same figure is 1. 7 per cent. if we focus on und1x, the underlying measure that guided policy especially in recent years but also during a large part of the period 1996 - 1999, the corresponding figures are 1. 8 and 2. 0 per cent, respectively ( see figure 1 ). whether this constitutes a good result or not is open to discussion, of course. allow me here to simply say that when the target was adopted, and as an observer outside the bank, i thought like many others that it would be very difficult to bring inflation down sustainably to a level around 2 per cent. what is particularly interesting in this context is that it has proved possible to establish a regime with a low inflation rate, close to the target, and to combine it with firm economic growth, which over these years has averaged almost 3 per cent a year, compared with about 2 per cent during the two previous decades. if anything, economic growth also appears to have become more stable since the inflation target was introduced. 2 another way to assess policy is to study whether we have acted in the way that we say we will, i. e. followed our policy rule. figure 2 shows our interest rate adjustments on the vertical axis and our inflation forecasts ’ deviation from the target two years ahead on the horizontal axis. as we can see there is a clear relationship between forecast deviations from target and our decisions, but there are

points therefore appeared reasonable. the rate for the continued adjustment of monetary policy will depend as usual on the information received. to understand the aim of monetary policy, it is necessary to be aware that monetary policy normally has an impact with a relatively long time lag. it is not aimed at the current low inflation rate, but at the expected inflation rate a couple of years ahead. one must also take into account the fact that even after raising the repo rate to 2 per cent, monetary policy is still expansionary. during the entire forecast period, the repo rate is expected to be lower than what can be considered an average key rate in the long term, and lending is expected to continue to increase relatively strongly, even after an interest rate rise. in my opinion, the information received recently does not significantly change the picture outlined in the inflation report. the national accounts for the fourth quarter of last year were slightly weaker than expected, but at the same time, the outcome for previous quarters was revised up, so that gdp growth for the year 2005 as a whole was as expected. inflation was slightly lower than expected in january, but in february inflation was slightly higher than expected. the moving three - month averages in the labour force surveys in february showed largely the same picture of labour market developments as that on which our interest rate decision was based. conclusion in conclusion, i would like to return to my theme for this talk, namely that things are better now. of course there are problems now, and of course one can discuss whether monetary policy should provide a little more or less stimulation. however, with the long - term perspective i have tried to provide here today, i believe that sweden has a much better economic situation now than during the problem years between the mid - 1970s and the mid - 1990s. we have a regulatory framework for exchange rate and monetary policy, as for fiscal policy, which promotes macroeconomic stability and good economic growth. it is important that we safeguard these regulations.