, household financial vulnerabilities remain elevated, although we will be analyzing the positive implications of a higher household savings rate for those vulnerabilities. all things considered, then, it was governing council ’ s view that the balance of risks does not warrant lower interest rates at this time. in forming this view, we weighed the risk that inflation could fall short of target against the risk that a lower interest rate path would lead to higher financial vulnerabilities, which could make it even more difficult to attain the inflation target further down the road. clearly, this balance can change over time as the data evolve. in this regard, governing council will be watching closely to see if the recent slowdown in growth is more persistent than forecast. in assessing incoming data, the bank will be paying particular attention to developments in consumer spending, the housing market and business investment. with that, senior deputy governor wilkins and i will now be happy to take your questions. 2 / 2 bis central bankers'speeches

occur temporarily because new production facilities are not always available just when they are needed to cope with increased demand. however, experience in the 1990s suggests that firms are more flexible than before, both in the utilisation of existing capital stocks and in the procurement of new technology, machinery and plant when demand rises. so, if anything, it is not the level of unutilised capital resources that is critical at present. instead it is probably the labour market that should be focused when analysing resource utilisation. another reason for doing so is that in a price analysis at macro level, the weightiest item in costs is wages : total wage costs are equivalent to over two - thirds of gdp. the level of unemployment, although it has been reduced, is still high, particularly compared with the post - war period up to the early 1990s. seen from that angle, some might say that the swedish economy has plenty of unutilised resources. experience from other european countries has taught us, however, that when an economy has been through a severe shock, as happened in the early 1990s, unemployment tends to stick at a high level, at least for a while. this structural or equilibrium unemployment cannot be reduced by means of expansionary economic policies. attempts to do so simply lead in the end to a higher inflation trend and probably an economy that functions less efficiently. this is because wage costs tend to adjust upwards as the expansionary policy acts on the economy and higher long - term inflation expectations are established. viewed in this way, unemployment could be divided into two components, structural and cyclical. if the level of structural unemployment could be identified with some precision, it would be easier to gauge how much room the swedish economy still has for expansion above its potential growth trend. as always when one turns from theory to practical policy, things immediately become much more difficult. you have to make do with estimates, which in the nature of things are uncertain and therefore have to be interpreted with caution. still, the available estimates do suggest that in sweden the equilibrium level of unemployment rose in the early 1990s and is somewhere in the interval 4. 5 to 7. 5 %, expressed in terms of registered unemployment. 1 the oecd also concludes that the level has increased markedly in the 1990s and judges that in sweden equilibrium unemployment is around 6 %. 2 not everyone agrees, however, that equilibrium unemployment is markedly higher than before. 3 but even though we cannot be certain about its exact level, an increase is