inflation report, und1x inflation with an unchanged repo rate of 3. 75 % is forecast to be 1. 5 % one year ahead and 1. 9 % after two years. when various alternative paths are taken into account - above all the risks of a higher oil price, a weaker exchange rate and more rapid wage increases - the rates of inflation are judged to be somewhat higher, namely 1. 6 % and 2. 1 %, respectively. the inflation assessment starts from a continuation of strong international economic activity. together with rising consumption and a favourable development of investment, this provides conditions for further rapid growth in sweden, too. gdp growth in the main scenario is forecast to be 4 % this year, 3. 7 % in 2001 and 3 % in 2002. compared with the june report, only minor revisions have been made to gdp growth in sweden up to 2002. neither has the inflation forecast been altered more than marginally. that future inflation is not higher, even though the economic upswing is continuing and the forecast horizon has been shifted ahead, is partly a consequence of the amount of unutilised resources now being considered to be somewhat larger. wage increases are judged to be somewhat lower, accompanied by marginally higher productivity growth. in the short run, however, inflation is expected to be somewhat higher than forecast in june, mainly because the oil price is higher and the exchange rate somewhat weaker. while the oil price and exchange rate assessments have been revised in the light of developments in the summer and early autumn, the forecast of inflation one to two years ahead still counts on a successive appreciation of the krona and a gradual fall in the price of oil. however, the uncertainty is considerable. a higher oil price and a weaker exchange rate could lead to inflation rising more rapidly than assumed in the main scenario. the assumption of a somewhat lower rate of wage increases is supported by, for example, wage outcomes to date this year as well as inflation expectations that are relatively low and stable. still, there is considered to be some risk, albeit relatively small, of a development of wages that is considerably stronger, for example as a result of negotiators ’ demands for parity and compensation. together with confidence in the low - inflation policy, the situation in the labour market and the coming wage negotiations will be of crucial importance for the future formation of monetary policy. the present decision to leave the repo rate unchanged for yet another while is to be seen in the light of the assessment that

explanation for the discrepancy between our economies may lie in the different ways in which productivity is measured in the united states and in europe. there are also some indications that productivity growth may accelerate in the future but they are still too uncertain to support any more far - reaching conclusions in the formation of monetary policy. it is accordingly conceivable that the swedish economy will move into a process with accelerating productivity growth but let us wait until that happens before incorporating it in our expectations and policy decisions. our economy is developing favourably enough as it is. a growth process driven by rising investment and productivity can result in good circles. to some extent, that can be said to have been the case in recent years. it accordingly helps to explain the favourable economic developments in sweden. another cause lies in the various deregulations that have been implemented. inflation this year improved by deregulation and competition thus, it is other positive supply side effects that have helped to achieve the rapid output growth without generating inflationary impulses. the effects have come from the deregulation of electricity and telecom markets, as well as from the eu ’ s agricultural reform. meanwhile, the temporarily lower rate of inflation has meant that real wage growth has exceeded expectations and thereby acted as a general demand stimulus. on the whole, however, the effects are of the one - off kind that lower the price level and stimulate demand for just a limited period. but if these effects have a gradual impact on different segments of the economy, their overall impact on inflation may be spread over many years. another explanation for the favourable overall price trend is the generally stronger competition. it is now more difficult for firms to raise prices in order to improve profit margins, as usually happens at this stage in a business cycle. to some extent this may also be because firms know that price impulses from that quarter will inevitably cause the riksbank to raise the instrumental rate. to achieve a reasonable return on capital, firms are obliged instead to make production more efficient. that tends to result in better productivity. the increased oil prices can be cited correspondingly as an example of a negative supply shock. that is not an entirely adequate description, however, because to a certain extent, rising oil prices have to do with the better global activity, which normally leads to a general increase in commodity prices. the oil price increases tend to push prices up and curb output. but so far, the combined impact of all the supply shocks seems to be positive, that is