of economic activity abroad and sweden has also been hit hard by the severe international downturn. gdp has fallen for five quarters in a row. however, since the beginning of the second quarter of this year this fall has slowed down and gdp even increased somewhat between the first and second quarters ( see figure 6 ). furthermore, indicators for development in the third quarter, such as the purchasing managers ’ index and the economic tendency survey, point to the recovery coming slightly sooner than we previously believed. we have therefore revised our forecast for growth in 2009 upwards slightly. but the recovery will begin from a very low level. sweden ’ s gdp is now expected to fall by 4. 9 per cent this year compared with last year. this is the largest decline in swedish gdp in an individual year since 1940. the labour market is still showing weak development despite the slightly brighter picture of economic growth, the situation on the labour market is expected to be gloomy for some time to come ( see figure 7 ). this is because the labour market can not improve as long as the companies have unutilised resources and still need to reduce their workforces. unemployment is therefore expected to increase both this year and next year. our assessment is that unemployment will not increase again until 2011. inflation is currently low inflation has fallen rapidly since the end of last year and we believe that it will be negative for a large part of the year. the fact that inflation, measured in terms of the consumer price index, the cpi, has fallen so quickly is primarily due to the fall in energy prices and mortgage costs. inflation measured in terms of the cpif, in which mortgage rates are kept constant, is more stable but it is expected to be below 2 per cent for most of the forecast period ( see figure 8 ). my view of the situation at the latest monetary policy meeting, i advocated an unchanged repo rate and repo rate forecast. this was also the decision made by the majority. as in july, we also decided to offer our monetary policy counterparties loans at a fixed interest rate for one year. as i mentioned earlier, this can strengthen expectations that the repo rate will remain at the decided level throughout the maturity of the loans and also contribute to lower interest rates for households and companies in other ways. many analysts felt that the decision to leave the repo rate unchanged was self - evident. the decision to retain the same repo rate path that we adopted in july was perhaps more unexpected. i will explain the

have to weigh together different measures and indicators in a reasonable way. this of course provides greater scope for a wider range of assessments. the financial crisis has, not least, also raised the question of to what extent monetary policy should take financial stability into account. this is an important question that should be analysed further. let me conclude by saying that it appears that the fiscal policy and monetary policy stimulation measures that are being implemented throughout the world are beginning to have the desired effects. the situation in the financial sector has improved and an economic recovery is now discernable. but it is still uncertain whether the recovery is stable or whether there is a risk that it will come to a halt as soon as the fiscal policy and monetary policy stimulation measures are phased out. deciding the appropriate time to begin the phase - out of the now very extensive monetary policy stimulation measures is a major challenge. if the phase - out begins too early there is a risk that the recovery will come to a halt. if we wait too long, there is a risk that we will need to increase the repo rate very quickly in order to meet the inflation target. this is a balance that is much easier to achieve in theory than in practice! however, as i have explained here today, my assessment at the latest monetary policy meeting was that it will still be necessary to keep the repo rate at this low level for a long time to come. thank you! 1. financial markets functioning better basis spread, basis points sweden euro area usa united kingdom jan - 07 apr - 07 jul - 07 oct - 07 jan - 08 apr - 08 jul - 08 oct - 08 jan - 09 apr - 09 jul - 09 oct - 09 note. the difference between 3 - month interbank rate and expected policy rate ( basis - spread ) sources : reuters ecowin and the riksbank 2. world trade stabilising world trade monitor index, 2000 = 100, seasonally - adjusted data source : netherlands bureau for economic policy analysis 3. growth in asia gdp, annual percentage change - 5 - 5 china south korea - 10 - 10 taiwan japan - 15 - 15 sources : national sources 4. house prices in the usa index, january 2000 = 100, seasonally - adjusted data source : standard & poor's 5. growth increasing in the world gdp, quarterly change in per cent calculated as an annual rate, seasonally - adjusted data - 2 - 2 - 4 - 4 euro area - 6 - 6 usa - 8 - 8