to adjust to changes in the repo rate. this means, for instance, that we have not yet seen the full effect of the expansionary monetary policy we have conducted in recent years. it also means that interest rate decisions must be based on an assessment of how the economy will look a few years from now. let me describe how we usually reason when making interest rate decisions. this is also something described in greater detail in the document on monetary policy that we published last week. the objective of monetary policy is to maintain price stability. this was established in the changes to the sveriges riksbank act, which came into force in 1999. the riksbank has specified this in the form of an inflation target, whereby the rate of change in the cpi should be 2 per cent with a tolerance interval of + / - 1 percentage point. stable prices are thus the objective of monetary policy in sweden, as in all other countries in the industrialised world. the fact that the target has been formulated in this way is because price developments are the only thing that monetary policy can steer in the longer term. long - term developments in growth and employment are essentially unaffected by changes in the interest rate. they are determined by factors such as productivity and the supply of labour and capital, as well as the way the labour market – and the economy as a whole – functions. it is possible to say that monetary policy can indirectly create good conditions for an efficientlyfunctioning economy by maintaining inflation at a low and stable rate. the pricing and wage - setting systems function more efficiently if changes in general price levels are small and predictable. this makes it easier for companies and consumers to make wise decisions regarding investment, consumption and employment. the development of the swedish economy during the 1970s and 1980s provides a particular indication of how failed investment and arbitrary distribution of income can result from high and fluctuating inflation. in the short term, monetary policy also affects the economy ’ s cyclical pattern. when we formulate our monetary policy we therefore try to do so in a way that contributes to the most favourable and stable macroeconomic development possible, without jeopardising the price stability target. in other words, we are not ” inflation nutters ”, to use a phrase coined by my british colleague mervyn king. this means that we do not set interest rates merely to ensure inflation is on target as quickly as possible in all situations. it is very important to emphasise that the possibility to formulate monetary policy based

##demic thus affected the economy via both the demand and the supply side. 2 speech as households reduced their consumption, their savings increased markedly. 2 as households had needed to restrain their consumption for a long time, the recovery was then very fast as effective vaccines were put in place and countries could start opening up in 2021. in some areas, activity rose from almost nonexistent to very high levels in a short period of time ( see figure 2 ). compared with the 1990s crisis and the 2008 global financial crisis, gdp recovered much faster after the pandemic ( see figure 3 ). in many countries, labour supply had fallen sharply as many people had left the labour force during the pandemic. in sweden, the overall labour force participation rate did not decline significantly, but many people chose to retrain or change sector. as a result, when demand quickly recovered, many companies found it difficult to recruit labour with the right skills. the labour shortages caused wages to rise relatively substantially in several countries. the recovery was supported by various fiscal policy support packages, which in some cases were very extensive. 3 for households, this included support in the form of unemployment benefits and sickness benefits. in the united states, large amounts of direct cash assistance were also paid out. companies received support in the form of grants and guarantees to cover revenue losses and to continue borrowing at a relatively low cost. in europe, there were also furlough schemes that saved many workers from being laid off. fiscal policy support was generally large, but in comparison with the united states and other european countries, fiscal policy support measures were relatively smaller in sweden. 4 at the same time, it is difficult to compare, as the social security systems already in place provided different protection in different countries. it is also difficult to compare how effective the measures were in different countries. for example, furlough schemes can stabilise employment in the short term, but in the longer term they can reduce the dynamism of the economy and contribute to weaker productivity growth. global supply disruptions lingered longer than expected the upturn in global demand contributed to a rapid increase in commodity prices for metals and food in 2021. at the same time, disruptions to global trade persisted, causing, among other things, a significant increase in freight prices. input prices rose to record highs for both manufacturing and services companies. 2 in sweden, surplus savings, i. e. the difference between normal savings and temporarily higher savings, rose to a historically high