the sveriges riksbank act ( prop. 1997 / 98 : 40 ), it is stated that “ as an authority under the riksdag, the riksbank, without prejudice to the price stability market, should furthermore support the goals of general economic policy with a view to maintaining a sustainable level of growth and high rate of employment ”. how should this be interpreted? what is the best contribution monetary policy can make towards maintaining a sustainable level of growth and high rate of employment? it is to stabilise resource utilisation around a normal level. considering the price stability objective stipulated in the sveriges riksbank act and the stance taken in the preparatory work, it can be concluded that monetary policy should be aimed at stabilising inflation around the inflation target and resource utilisation around a normal level. this is called flexible inflation - targeting in the terminology i proposed in a number of papers published in the 1990s ( svensson 1999 ). this is, incidentally, completely in line with the stance adopted by the parliamentary committee on finance in 2007, in its comments on the evaluation of monetary policy in the period 1995 – 2005 by francesco giavazzi and frederic mishkin ( 2006 / 07 : fiu27 ) : “ the committee maintains that swedish monetary policy should be conducted in a flexible way and should aim to stabilise the development of inflation, employment and production. ” this being so, some people may wonder : wouldn ’ t it be better to have a level of resource utilisation that is higher than normal? shouldn ’ t monetary policy be aimed at achieving a higher level of resource utilisation than normal? well, you may think so – but 40 years of practical experience and 30 years of theoretical and empirical research have produced overwhelming evidence that monetary policy alone cannot bring about a higher than normal level of resource utilisation. making attempts through a more expansionary monetary policy will not lead to success in increasing resource utilisation and employment. the only result to be achieved will be higher inflation than desired – that is to say that, on average, the inflation target will be exceeded. consequently, for monetary policy, the highest level of resource utilisation that is sustainable over the longer term is the normal level. other economic policies than monetary policy, such as labour market policy and structural policies improving the workings of the economy and the degree of competition, are needed to raise production and employment above the level that today is normal for these variables.

( undinhx ) in december was unchanged from the preceding month at 1. 6 %, though this was still somewhat below our forecast. us equity prices a possible risk the global financial unrest subsided towards the end of 1998. interest rate differentials between different market segments narrowed again and stock markets stopped falling. this made it less probable that the global economy would remain weak for a number of years. recent developments in brazil have contributed to some recurrence of unrest in international financial markets. once again there has been an international flight to securer assets but it has been more limited than last autumn. there has, however, been a substantial depreciation of the brazilian currency. it is still difficult to tell just how crisis in brazil may affect the world economy. the future course in brazil, with the attendant risks of knock - on effects in latin american and other parts of the globe, will depend on what the national authorities do to construct a sound foundation for the economy. it has been shown, not least by our own economic experience in the early 1990s, that changing from a fixed to a floating exchange rate does not by itself provide a lasting solution to economic problems. what is needed is rather a comprehensive programme for enhancing confidence, with budget policy as not the least important component. a clear target and a consistent approach in monetary policy – 4 – can also contribute to economic policy ’ s credibility. but it does seem likely that developments to date in brazil will tend to subdue growth in latin america and even to some extent in the oecd area as a whole. despite the unusually long duration of the us economy ’ s upward phase, the situation there is still buoyant. growth in the closing months of 1998 was very strong. however, some slowdown is foreseen, partly because of a weak international trend but also due to subdued consumption. the high level of equity prices has been cited as a risk to us economic development. us stock markets have recovered completely from last autumn ’ s fall and new all - time highs have been noted. equity prices are considered by many observers to be unduly high in relation to the companies ’ profit expectations and there has been talk of a future correction. given the importance of the share price rise for the us economy ’ s upward trend, a price fall could by the same token lead to a slowdown. prospects for the euro area as well as for the japanese economy seem to have become somewhat poorer since the december report, at least for the