course no easy task. but nevertheless an urgent one. as i mentioned earlier, the interest rate will be lower on average in the period ahead, sometimes much lower if monetary policy is to be able to meet the inflation target. the financial side of the economy needs to be robust enough to cope with such periods without macroeconomic developments being exposed to too large risks. the way forward structural changes and our experience over the last ten years will thus be of significance for monetary policy going forward. but what does this mean in more concrete terms? 12 see financial stability report 2017 : 2, sveriges riksbank. 10 the main direction is determined by international developments to begin with, it is important to bear in mind that the swedish economy is very dependent on developments abroad. just as before, the main direction of the swedish economy will follow international developments. i have already discussed how significant the global level of interest rates is for interest rates in sweden and hence for monetary policy. in addition, the economic outlook and inflation prospects will, to a large extent, be influenced by what happens abroad, especially in the rest of europe. one special circumstance is that economic activity and normalisation of economic policy will be in a different phase in the euro area than in the united states in the coming period. this is not so strange given developments over the last ten years. but as swedish economic activity has been stronger than in the euro area, normalisation here at home looks as though it might start earlier than in the euro area, according to our forecast. in other words, we will probably be after the us central bank but slightly before the ecb. this is a special situation that can affect the impulses from abroad as regards economic activity and inflationary pressures. inflation can rise in different ways. lately, price pressures from abroad have been subdued and the upturn in inflation has largely been domestically driven, primarily via price increases in the service sector. the combination of wage and price developments in domestic sectors and inflationary impulses from abroad will determine how monetary policy should be designed to influence domestic demand and the exchange rate in the desired direction, so that inflation ultimately stays around the target. to some extent, it will of course be less complicated for monetary policy if inflationary pressures both rise abroad and in domestic sectors and in ways we are used to – and the risks of imbalances may then also be mitigated. complementary monetary policy measures may be the norm as i mentioned earlier, the environment of low real interest rates

accumulation in many countries. an environment with a lower average repo rate the major question is what we can expect going forward. for a small, open economy like sweden's, the interest rate on a global level is important as it affects domestic rates. with free movement of capital, it is difficult to have real interest rates that deviate a great deal from the global level in the long run, even if differences in demographic trends or long - term productivity growth can naturally play a part. it is true enough that real interest rates in sweden have exhibited a similar downward trend to real interest rates internationally. this is of significance for monetary policy as it implies that the riksbank ’ s repo rate is lower on average. and a lower repo rate on average means that the margin down to zero and minus rates decreases – i will come back to the implications of this in a moment. how long will low real interest rates last? the answer naturally depends on what are believed to be the most important driving - forces behind developments. but regardless of whether you believe that it is a permanent phenomenon or that there is a more cyclical explanation, the low interest - rate environment will probably last for some time to come. even if interest rates will rise in the near term, it is towards a lower average level than previously. many central banks, including the riksbank, have adjusted down their assessments of long - term policy rate levels. our current assessment is that the repo rate will, in the long run, be between 2. 5 and 4. 0 per cent. 4 but it will probably take a long time before we reach that level. higher interest - rate sensitivity among households one effect of the decline in interest rates in sweden is, as we all know, the increase in household indebtedness. seen over the last twenty years, debt in relation to disposal household income has almost doubled. currently, aggregate household debt is almost twice the level of income. for around a quarter of a million households, debt is 6 times greater than income or higher. high indebtedness linked to rising housing prices as most of the debt consists of mortgages, the growing indebtedness reflects the development in housing prices. prices of detached or semi - detached houses have tripled in the last 20 years, while prices of tenant - owned apartments have increased at an even faster rate. the rapid price increase depends on several factors, in addition to the low interest rate level. the population and income