of more expansionary fiscal policy in the period ahead, which can be expected to further boost demand in the economy through effects on both private and public consumption. new national accounts data also indicate that the pickup in investment long expected by the riksbank and other forecasters now appears to have begun. as in the may report, gradually higher resource utilisation and rising international prices are expected to lead to a gradual increase in inflationary pressures. so, although inflation is expected to be slightly higher than previously anticipated, our assessment is that it will be in line with the riksbank ’ s target towards the end of the forecast period. some questions one could say that the inflation report revolves around some questions, which i intend to touch upon briefly : • one question is to what extent the high oil price will significantly hamper international economic activity. although we, like most other forecasters, still assume that the oil price will fall again over the coming years, our assessment is that the price will be higher during the forecast period than we estimated in may. however, there are indications that the effects of the high oil price on growth will be relatively limited. for instance, the rise in the oil price appears to be largely a result of the fact that the world economy is expanding, although concern over terrorist acts and other factors also appears to have played a role. in addition, western world economies are today much less dependent on oil than they were in the 1970s, while monetary policy is now conducted in a way that makes it difficult for inflationary impulses from oil price rises to gain a foothold. our current assessment is therefore that the high oil price will dampen, but not derail, the international economic upswing and that the effects on global inflation will be fairly modest. • another question is how inflation could be so low thus far this year, despite growth being relatively high. one important explanation for the relatively low domestic inflation is, as i mentioned earlier, the high productivity growth. combined with low wage increases, the favourable productivity growth has meant that cost pressures in the swedish economy have continued to be moderate. this has been the case despite electricity prices failing to fall as sharply as we assumed in may. imported inflation, which i also touched upon earlier, has been weak as well. the high oil price has been countered by price falls for other imported goods, including clothes and footwear. this question is in turn connected with another : how is it that we expect inflation to remain relatively low during the

stability, which is one of the themes for our forthcoming discussions, has always been an important item on the central bank policy agenda. a well - known swedish economist, knut wiksell, was a clear exponent of the idea in the late nineteenth century. as it happens, he addressed an audience on the subject here in stockholm a hundred years ago almost to the day, namely on 14 april 1898. in one of his books he wrote : “ if prices rise, the rate of interest is to be raised ; and if prices fall, the rate of interest is to be lowered ; and the rate of interest is henceforth to be maintained at its new level until a further movement of prices calls for a further change in one direction or the other. ” just over three decades after his address in stockholm, sweden had to leave the gold standard in september 1931. the objective of monetary policy was declared to be to use “ every available means to maintain the swedish krona ’ s domestic purchasing power ”. in this way the riksbank was the first central bank to declare openly that its monetary policy norm was price stabilisation. notwithstanding this long tradition, after inflation ’ s rising trend in the post - war era, swedish economic policy ’ s reorientation toward price stability did not begin until the late 1980s and early 1990s. that was a decade or so after such realignment had been initiated in other countries. by then, sweden had experienced twenty years of inflation that averaged 8 per cent a year. that was the longest inflationary period since the early nineteenth century. in contrast, in the one hundred and forty years from 1830 to 1970, inflation in sweden had averaged an annual rate of 2 per cent. so one can say that in the present decade we have been re - establishing our roots. sweden ’ s policy realignment in the early 1990s was, however, more painful than anyone could have foreseen. one conceivable explanation is that, having waited longer than other countries, the road back to price stability was more difficult for us. there were also a number of exceptional events along the way. what was perhaps the worst bank crisis of the century erupted in the wake of the 1980s ’ bubble economy. exchange rate turmoil was such that, during some dramatic days, the instrumental rate was hiked to 500 per cent. in the early 1990s the budget deficit grew to be the largest in the industrialised world. there are many similarities, as well as some differences, between the