. the weak labour market is expected to hold back wage increases in the central wage bargaining rounds during 2010, which should contribute to lower cost and inflationary pressures. and even if economic prospects look better than we anticipated in our earlier forecast in september, we will have more spare capacity than normal in the swedish economy throughout the forecast period. repo rate low until autumn 2010 the riksbank has cut the repo rate very substantially over a fairly short period of time, from 4. 75 per cent last autumn down to 0. 25 per cent in july this year. the largest cuts were made mainly during last autumn and winter. since february the repo rate has been lower than ever before during the period we have conducted inflation targeting ( figure 3 ). figure 3. repo rate forecasts, per cent, quarterly averages 90 % 75 % 50 % outcome forecast greater effects of support measures confidence strengthened more quickly - 1 - 1 phasing out of support measures higher productivity - 2 - 2 source : the riksbank we are currently expecting to hold the repo rate unchanged at a low level for a further period to come, until autumn 2010. this is necessary to contribute to a stable recovery and to attain the inflation target of 2 per cent. moreover, we executive board members decided at the most recent monetary policy meeting that further measures were necessary to contribute to interest rates on loans to companies and households remaining low. we therefore decided to offer the banks the opportunity to borrow from the riksbank at a fixed interest rate and a maturity of around 11 months. the loan auction was held on monday this week and the final amount lent was sek 95. 3 billion. we expect the loans to the banks to complement the repo rate tool in a way that enables monetary policy to have the desired effect. once economic activity has recovered, we are intending to raise the repo rate to more normal levels. this is necessary to ensure a balanced economic development and an inflation rate in line with our target. our repo rate forecast is exactly that – a forecast, not a promise. but it is nevertheless important that anyone borrowing money to buy a home or for other reasons should include a sufficient margin, taking into account that today's low interest rates will not last for ever. let me linger a bit with the housing market and interest rates as these subjects have much discussed recently. monetary policy and house prices one issue that has been taken up, not least in the media, is that the policy we are

now conducting could possibly contribute to a further rise in house prices, despite the weak economic activity. this could in turn increase the risk of imbalances arising in the housing market. it is true that the riksbank ’ s policy, by affecting interest expenditure, has significance for the way housing prices develop, although many other factors are also important. but the policy we are currently conducting is what we consider to be necessary to attain the inflation target and to provide sufficient support for the recovery in the swedish economy. we cannot adapt monetary policy on the basis of individual markets as long as we do not regard this as something that affects our ability to meet the inflation target and to safeguard financial stability. but this does not mean that we do not care about house price movements. on the contrary, we closely follow developments in the housing market. figure 4. house prices and lending to households, annual percentage change - 4 - 4 - 8 - 8 house prices - 12 - 12 household lending - 16 - 16 source : statistics sweden in the long term it is hardly sustainable that house prices should continue to rise as quickly as they have done since the mid - 1990s ( figure 4 ). since 1996 house prices have increased by around 8 per cent a year. but in the shorter term, our assessment is that there is no reason for the riksbank to give greater consideration to house prices than we already do in our forecasts for the economy. let me just add something that may not arise very often in the general debate on these issues. although interest expenditure is one of the factors that has significance for the way house prices develop, the responsibility for sustainable growth with regard to lending and house prices is largely beyond the riksbank ’ s control. monetary policy can probably only function as a complement to effective regulation and supervision. and there are many factors that are important in ensuring a balanced development in the housing market. one fundamental factor is that households endeavour to make realistic calculations of how much interest expenditure and amortisation they can manage in the long run, not only when interest rates are as low as they are now. something that can be said to be the flip side of the same coin is that the banks make responsible credit assessments when lending money. if these two basic components are in place, there is a good chance of avoiding an out - ofcontrol situation further ahead, although as i said before there are many other factors that may be important. finansinspektionen ( the swedish financial supervisory