of which i have mentioned earlier, inflation has been much lower in sweden than in other countries. compared with the united states and the euro area, the difference is between 0. 5 and 1 percentage point on average for the past three years, depending on which inflation measure is used. in 2004, the difference was as much as 2 percentage points. when one looks ahead, which is important in this context, according to consensus forecast, forecasters are expecting higher inflation in the euro area and the united states than in sweden, ” continued mr heikensten. ” it is clear that the krona has developed more weakly since the spring than the riksbank expected. as you know, we do not have a target for the exchange rate. however, it is an important factor when we assess future inflation. in this context it is not the present exchange rate that is decisive, but how we see it developing in a slightly longer - term perspective. there is no reason to depart from the basic assessment we made earlier ; there are still strong reasons in favour of a stronger krona. it is not merely that swedish macro data in general has developed well over a number of years compared with, for instance, the euro area ; most forecasts indicate that this development will continue. sweden is also one of the countries that has had the highest trade surplus as a percentage of gdp over a number of years, which is one indication among many that the value of the krona has been relatively low. however, even if we should not – as i see it – change our basic assessment that the krona will strengthen, its value at present is rather different. there is therefore reason to take into consideration a risk scenario for inflation linked to a weaker exchange rate. just as the riksbank emphasised during 2003 and 2004 that the strong krona was one reason behind the low inflation rate, there is reason to point out that the weakening of the krona this year, particularly if it persists, could result in higher inflation, ” said mr heikensten. ” all in all, i do not at present see any reason to change my view of inflation now to any great extent, compared with the october assessment. however, in my opinion, the changes that have occurred would appear to indicate slightly stronger economic growth and perhaps also the risk of a slightly more rapid rate of price increase, mainly connected with international inflation and a weak krona. given the information we have now, the financial markets ’ expectations

of expectations, almost all of the unemployment effect svensson has calculated disappears ( floden, 2012 ). and soderstrom and vredin ( 2013 ) point to problems with interpreting causal relationships behind svensson ’ s estimated phillips curve. the claim that unemployment would have been lower if a more expansionary monetary policy had been conducted since 2010 appears more plausible, however. but one can find objections to this conclusion. first, the reasoning presumes that a more expansionary monetary policy would not have caused the crisis scenario that a majority of executive board members have expressed as a risk that justifies a higher repo rate ( see the article in monetary policy report february 2014 ). second, higher unemployment now can be counterbalanced by lower unemployment in the future, as monetary policy can become more expansionary in the future when inflation and inflation expectations today are low. the question is thus whether the low inflation affects the average level of unemployment or merely the volatility of unemployment over the business cycle. examples are the us federal reserve, the bank of england and the european central bank ( ecb ). the two first - named banks have supplemented low policy rates with quantitative easing to try to make monetary policy more expansionary. see smets ( 2013 ) for a review of various points of view on this question. bis central bankers ’ speeches short time before other macroprudential policy measures are in place. but studies show that typical credit cycles are much more protracted than normal business cycles. 15 the status of the inflation target would probably be questioned if monetary policy “ leans against the wind ” – that is, results in an inflation rate below the target – for many years to dampen an expanding credit cycle. this reasoning becomes increasingly important the lower the inflation and policy rates are. if inflation expectations fall, increasingly expansionary monetary policy will be required to bring inflation back up to the target. 16 and as the policy rate has a lower bound, it may be difficult to make monetary policy sufficiently expansionary once this bound has been reached. one conclusion from these insights may be that monetary policy should react asymmetrically when inflation is low. monetary policy should then counteract falling inflation particularly strongly if there is a risk that the policy rate will otherwise reach its lower bound. 17 but the danger of deflation should not be exaggerated the low inflation in sweden and the euro area has recently led to much discussion on the risks of deflation, that is, a general fall in price levels. 18