declines. this means that resource utilisation, measured in terms of gdp, can increase or decrease without there being any simultaneous change in unemployment. neither is it certain, after companies have decided to increase or decrease employment, that this will be reflected by changes in aggregate unemployment. as the size of the labour force also varies, for cyclical reasons among others, the level of unemployment will depend on the extent to which individuals leave, remain in or enter the labour market. … but the connection is not stable monetary policy is forward - looking and must be based on forecasts. the practical conditions for forecasting actual unemployment are made more difficult by changes, over time, in the historical relationship between economic activity and the development of the labour market. during the financial crisis of 2008 – 2009, the riksbank was surprised ( as were other analysts ) to see that unemployment did not increase more, considering the steep fall in aku, 2010. bis central bankers ’ speeches output in the swedish economy. the swedish labour market coped comparatively well, both in comparison with how it is usually affected by falls in gdp and in comparison with developments in many other countries. 6 the former point is illustrated by figure 1. figure 1 unemployment calculated according to okun ’ s law7 per cent of labour force outcome okun 1 ( differences, 1980 - ) okun 2 ( differences, 2001 - ) 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 note : the difference version of okun ’ s law captures the relationship between gdp growth and the change in unemployment. the figure shows unemployment forecasts based on estimates of this relationship in two different time periods. source : the riksbank according to the historical relationship between changes in gdp and changes in unemployment, the change in gdp between the first quarter of 2009 and the third quarter of 2011 should have led unemployment to increase by 1. 5 – 2. 5 percentage points above the actual increase. the functioning of the labour market is decisive. actual unemployment is not only influenced by economic activity, but also by structural factors that shape the functioning of the labour market. these structural factors influence both the decision to enter the labour market and companies ’ decisions to hire and fire. examples of structural factors are the design of the taxation and social insurance systems, see, for example, the article “ the effects of the financial crisis on the labour market – a comparison of sweden,

the strong global economic activity has been beneficial for developments in sweden. the swedish economy has shown high growth rates in recent years. despite this, inflation has also been low here in sweden. this is mainly because import prices excluding oil have not risen and strong productivity growth has held down cost pressures. new data received since june shows that the international economic prospects still appear favourable. however, the signals from the us economy are slightly mixed. in particular, the cooling in the housing market points towards weaker growth than expected next year. the picture of the euro area and other parts of the world is that developments have rather been slightly stronger than we assessed in june. back in june, we envisaged fairly high growth in sweden over the coming years. the statistics received since then confirm that the economy is growing at a good rate. household consumption and housing investment have grown more rapidly than expected. however, both the number of persons employed and the number of hours worked have been lower than expected. this reflects the fact that productivity growth has been surprisingly high again. companies have thus been able to increase production without needing to take on so many new employees. most indications are nevertheless that the labour market will continue to improve. generally high lending and the fact that household indebtedness and house prices are continuing to rise rapidly support the picture of strong demand. rapid increases in energy prices have contributed to inflation being higher than the riksbank ’ s forecast over the summer. however, the oil price has fallen during the autumn, although it is as usual difficult to know whether this trend will continue. the oil price, like other energy prices, has a tendency to fluctuate considerably. there has been a recent downward adjustment in expectations of future energy prices. the strong productivity growth will contribute to unit labour costs being low this year. when employment increases it is reasonable to assume that cost pressures will also rise. our assessment is that energy prices will not push up inflation in future, but that rising unit labour costs will contribute increasingly to inflation. our assessment throughout the year has been that the outlook for inflation and the economy indicates that it is reasonable to assume the repo rate will need to be gradually increased. this will ensure that inflation is close to the target and that developments in the real economy are balanced. given this, we chose to raise the repo rate by 0. 25 percentage points at our monetary policy meeting in august. we have thus raised the repo rate four times so far this year and my assessment is that it