this to mean that there is still unshaken confidence in the inflation target. figure 4 money market participants ’ inflation expectations according to prospera per cent note. monthly data from september 2009. quarterly data prior to this. source : tns sifo prospera. i have so far discussed our experiences of publishing repo rate paths. let me now go on to discuss the most recent repo rate path in the monetary policy update published in april this year. some aspects of the current repo rate path figure 5 shows the repo rate path from the monetary policy update in april together with market expectations of the repo rate. for the coming year both forward rates and survey expectations were very close to the riksbank ’ s forecast. expectations as expressed in the surveys agree fairly well with the riksbank ’ s forecast, even in the longer run. however, expectations according to forward rates were much lower than the riksbank ’ s repo rate path in the longer run. the total deviation between the repo rate path and forward rates can also be seen on the far right in figure 3. figure 5 the repo rate path and market expectations in april 2010 per cent note. market expectations are based on forward rates. “ before ” are the closing rates on the day before the repo rate path was published. “ after ” are the closing rates on the day it was published. prospera ’ s survey covers money market participants. sources : reuters ecowin, tns sifo prospera and the riksbank. the real repo rate path how expansionary is the monetary policy that follows on from the riksbank ’ s repo rate path? one way to gain an idea of this is to look at the development of the real interest rate. the real interest rate is the most important for the development of the real economy, as it is the interest rate on which consumption and investment decisions are based. it is defined as the nominal interest rate minus expected inflation. the riksbank also publishes forecasts for the real repo rate in its monetary policy reports. figure 6 shows the riksbank ’ s forecast from the april monetary policy update together with different measures of market participants ’ expected real repo rate. 8 let us begin by looking at the riksbank ’ s forecast for the real repo rate. we can note that the real repo rate is presently below zero, and according to the riksbank ’ s forecast it is

to the number of open unemployed persons continuing to fall, but at an ever slower rate. compared with what we were expecting in june, the conditions in the labour market have become tighter. this means in turn that it is reasonable to assume that wages will rise more quickly ( slide 8 ). and the agreements signed so far support this picture. the new agreements will make an impact in 2008, and the labour shortages will also become more marked then. we are therefore counting on wages increasing more during next year than in 2007, by around 4. 5 per cent. labour costs per hour are also expected to increase. how this affects companies ’ costs for the goods they produce will in turn depend on how productivity develops. productivity growing more slowly and labour costs increasing if one looks back at the past decade, productivity in the swedish economy has improved significantly ( slide 9 ). this meant that production could increase more quickly than costs. it also contributed to employment showing fairly weak development over a long period, despite good growth. but more recently employment has increased, while productivity growth has been lower. we believe that the slower productivity growth is to some extent temporary. there can be several reasons for this. one reason is probably that new persons are being employed in the companies and that it quite simply takes time before they are fully productive. another could be that new groups are entering the labour market. for instance, the service sector normally increases fairly late in an economic cycle and then the productivity measured is slightly weaker. something that further fuelled the slowdown in productivity during the second quarter this year was the low holiday absence in june, which we assess to be a temporary effect. our forecast is that productivity will once again accelerate, but increase at a slower rate than it has in recent years. if one looks at the forecasts for the labour market and productivity together, one can also see that companies ’ costs in production are expected to increase more rapidly than in recent years. unit labour costs are rising according to our assessment, by 4. 8 per cent a year, but the rate of increase will then fall back as productivity begins to increase more rapidly once again. expectations confirm the picture of increased cost and inflationary pressures if i very briefly summarise the domestic situation, the wheels of the swedish economy are turning at a good pace. we have a high level of utilisation of economic resources and cost pressures are increasing. something that supports this picture is that both households and companies have adjusted their inflation expectations upwards, according to