national institute of economic research ’ s business tendency survey. 7 according to this measure, inflation expectations have followed actual inflation fairly well. in other words, the agents have not been “ tricked ”, but have realised that inflation can deviate from the target in the short run. if wage increases are based on this measure, then in other words real wages have not been too high and unemployment has thus not been “ unnecessarily high ”. before i move on to the next type of criticism, i would like to emphasise that what i have said here should not be interpreted to mean that i wish to make light of inflation undershooting the target. the riksbank should of course do its best to attain the inflation target and i can assure you that we do. however, it is not an easy task, and i believe that many people understand this. proposal for higher inflation target and target for employment another type of criticism is aimed at the target formulated for monetary policy. it comes in slightly different forms, but a common theme is that the inflation target should be raised, and that it should be combined with an explicit target for employment or unemployment. one concrete proposal that is put forward is that monetary policy should support a target for an employment rate of 80 per cent. 8 the level of central banks ’ inflation targets has begun to be discussed internationally as a result of the recent crisis. 9 one argument is that if the targets were set slightly higher, it would make it easier to stimulate economies in deep recession, as it would reduce the risk of the policy rate reaching the zero lower bound. this is a relevant argument. moreover, it is probably not the case that an inflation rate of, say, 3 per cent would be more problematic to live with than an average inflation of 2 per cent. it is only at considerably higher figures that inflation is harmful. difficult to change an established inflation target however, it is one thing to set an inflation target for the first time, and a quite different thing to raise an existing target. if we go back twenty years in time, to when the policy of inflation targeting was introduced, the target could in principle have been set at 3 instead of 2 per cent. it is possible that it would have been a little more difficult to make the target credible, partly because it should have been higher than actual inflation at the time – which was fairly exactly 2 per cent, and partly because the few central banks that had begun targeting inflation at that time had chosen

, lower inflation and high demand growth. larger amount of unutilised resources yet another explanation for the moderate path of inflation could be that the amount of unutilised resources is larger than we - and many others - counted on earlier. last autumn, for example, many observers believed, along with the riksbank, that labour shortages would lead to increased price pressure via higher wages. but our fears have not yet been confirmed. wage increases have been moderate even though the increase in employment is the highest for 40 years and unemployment has dropped to a level that few believed would be feasible after the profound crisis in the early 1990s. moreover, the labour shortage figures in the swedish economy have continued to be moderate. more people have joined the labour market. many of those who were full - time students earlier and thus not classified as participating in the labour force have now found work. the number of persons on labour market programmes has also fallen, thereby making a further contribution to the increased labour supply and helping to meet demand. these are some signs that the extent of the unutilised resources has been somewhat larger than allowed for earlier. we have therefore gradually altered our appraisal of resource utilisation in the swedish economy in recent years. there are, accordingly, a number of factors that have contributed to such a good economic development in recent years. a combination of favourable circumstances has so far made it possible to combine high total demand with price stability. but if the strong demand continues, sooner or later there will be labour shortage situations. shortages of labour with certain qualifications already exist in some regions. as the labour market becomes increasingly tight and shortages arise more generally, the risk of accelerating wage and price increases will grow. then, if not before, the repo rate will have to be raised. the present assessment today the riksbank is presenting a new economic assessment of the coming one to two years. the general features of the picture are the same as in our june report. although the economy has moved further along the upward phase, we continue to believe in a main scenario that combines a strong economic trend with no unduly alarming inflationary tendencies. it is important to note, however, that there are also a number of clear risks that we must keep an eye on in the future. monetary policy is currently formulated on the basis of an assessment of inflation excluding transitory effects from indirect taxes, subsidies and house mortgage interest expenditure ( und1x ). in the main scenario in the