it has appreciated substantially against both the dollar and the euro. it is likely that these recent developments have been due to market assessments of the relative strength of the swedish economy compared with the euro area in the near future, but also to a revaluation of the dollar against the euro following comments from the g7 meeting in dubai. all in all, developments in the krona have largely been in line with our forecast in the june inflation report. so the appreciation of the krona so far is in line with previous forecasts. should the krona continue to strengthen - and particularly if there is also reason to believe that the appreciation will last - it will of course have implications for our forecast. however, it is currently too soon to come to any real conclusions for inflation in the near future from the perspective that is significant for monetary policy. what these developments have mainly illustrated so far is perhaps how greatly exchange rates can fluctuate and how unexpectedly quick changes in sentiment can be. developments in the fixed income market have been less dramatic. however, the long - term yield spread on germany widened slightly in connection with the referendum. in all probability, the current yield spread is partly due to recently better growth prospects in sweden than in the euro area. it is also reasonable to expect that we will have to pay a certain premium in the form of a differential between swedish and german long yields for remaining outside the single currency. we can illustrate this by comparing the yield spread in, for instance, sweden, finland and italy ( see chart 1 ). swedish long yields are higher than finland's, whose situation in terms of growth and government finances has been roughly in line with our own. our yields are also higher compared with italy, despite their markedly weaker public finances. the salient features of the economic outlook world economic activity has been broadly in line with our forecast in the june inflation report. if anything, current tendencies are somewhat better, as concluded by the executive board at its monetary policy meeting in august. signs of a recovery in the us economy have become increasingly evident, which is pleasing of course. the outlook is different, however, for the euro area. perhaps there is reason to expect a slightly longer delay in the european revival, even if we have recently seen a number of positive signals of a forward - looking nature. on the other hand, it appears that economic activity in japan will be stronger than expected. on balance, it currently seems likely that international activity will be roughly in line with the forecast

swedish economy continued to grow at a good rate during the first six months of this year. 1 this is partly because the development of domestic demand has been relatively stable. there are several reasons why sweden has coped so well. sweden ’ s stable public finances, for example, have meant that fiscal - policy consolidation, which has otherwise dominated the economic - policy agenda in several other countries, has not been necessary in sweden. competitiveness has also developed well. this can be seen very clearly if we look again at figure 6. there are also a number of explanations for this positive development. we have had a period in which productivity grew very strongly in sweden for several consecutive years, inflation has been low and stable and pay formation has improved significantly compared with the period prior to the introduction of the inflation target. the fact that the swedish economy has been strong has also led to a resilient swedish labour market, and the number of those employed has continued to increase somewhat during the year. however, the supply of labour has also increased, so that the fall in unemployment we have seen since the start of 2010 was interrupted at the end of 2011. unemployment in sweden is now just below 8 per cent per cent ( see figure 9 ). … but high household indebtedness constitutes a risk another reason why the swedish economy has coped so well is that we have not suffered a crash on the housing market or in other areas of the financial sector. nevertheless, developments in sweden have given cause for concern. housing prices have risen significantly in sweden over the last 15 years in both an international and historical perspective ( see figure 5 ). the same applies to household indebtedness ( see figure 6 ). it is not surprising that there is a link between these factors as a large proportion of the banks ’ lending to households has been used to buy housing. i and several of my previous colleagues on the executive board warned about the risks associated with household indebtedness and housing prices in sweden long before the financial crisis. one could say that the crisis has given these issues renewed and increased currency. a positive factor is that the rate of increase in lending to households has slowed down recently following the very high rates of increase we saw in the years before the financial crisis. housing prices have also levelled out recently. both monetary policy and the mortgage cap have probably played a role in subduing lending to households. 2 however, the debt ratio, that is debt as a percentage of disposable income