per cent, while the interest ratio increased rapidly over a couple of years from around 6 per cent to almost 10 per cent. however, there is no doubt that the recent rise in indebtedness has made households increasingly sensitive to changes in interest rates. households tend to focus on their cash flow and are unperturbed as long as their debt - servicing costs can be accommodated in their monthly budget. but an interest rate rise of just a few percentage points would have a much bigger impact on cash flow today than when levels were around 15 per cent. an interest rate rise of four to six per cent would cause monthly costs to increase by 50 per cent. higher mortgage rates could therefore prompt households to increase their saving and reduce their consumption more than expected or intended. hopefully we will be able to avoid sharp, quick interest rate rises in our conduct of monetary policy, although mortgage rates are also influenced by events outside sweden. to some extent though, the effect of any increases in rates could be alleviated by the fact that an increasing number of households have recently been switching over to fixed - rate loans. developments in the commercial property market prices in the commercial property market have been driven by somewhat different forces than in the housing market. the trend here has also been more closely correlated to the level of economic activity, with prices falling over the last three years. however, the price decline in malmo [ 9 per cent ] has been considerably gentler than in stockholm [ 24 per cent ] or gothenburg [ 18 per cent ]. these declines have been mainly caused by lower rents, which essentially have been a result of lower demand for office premises due to the subdued economic activity. it also makes sense that malmo has been affected less than the other major cities given that the slowdown has not been as severe here. the rapid rise in prices and their subsequently rapid decline points to a trend not all that dissimilar from that experienced during the property crisis at the beginning of the 1990s. nevertheless, there are many differences between the two situations. there is no doubt that we experienced a bubble at the beginning of the 1990s, when prices largely lost their relationship to fundamentals and were instead underpinned by expectations of future price rises. for a period of time the direct yield on property was 8 percentage points lower than the yield on a government bond. so investors must have expected prices to increase a good deal more than 8 per cent in order to compensate them for the risk of investing in property rather than bonds. in this

we follow the principles we claim to follow for attaining the inflation target. even if the monetary policy framework remains intact, this is no reason to become too comfortable. during the spring we began work on a review of the process used to produce the information on which our interest rate decisions are based. this includes considering how one of our most important documents - the inflation report - can be improved. it also involves improving our ability to predict price trends. work on the riksbank's other main objective - financial stability - has been characterised to a great extent by the experiences of the financial crisis that shook sweden in the early 1990s. the riksbank has been something of a pioneer, being the first central bank in the world to publish reports on financial stability. there is also reason to make a fresh effort in this field. we are in the process of appointing a group of experts, which includes a couple of international experts, who will evaluate our work and present suggestions for improvements. the evaluations we make will be followed up with open seminars, where we can discuss the future direction of our operations with economists from the academic world as well as actors in the financial sector. the riksbank is currently one of the world's most open central banks, but we can certainly become better. our work will in future be aimed at ensuring that the riksbank reaches a broader general public than is currently the case. our ambition is to create even broader support for our operations and thereby greater understanding of what we do and why we do it. personally, i intend to travel around the country before the autumn and spring monetary policy meetings to talk and listen to representatives of local industries and regions. the inflation perspective it was observed in the june inflation report that for some time there had been gradual downward revisions to the forecasts for the world economy. the riksbank's forecast, like that of other analysts, was that the international recovery would be slower and more prolonged. there were several reasons for this, including geopolitical unease and increased caution among households and firms in the wake of the stock market fall. the conditions for a clear recovery in the euro area were perceived as poorer than we had earlier believed, which made a recovery in other countries, including sweden, more difficult. the more negative economic outlook, with inflation prospects below the target of 2 per cent, meant that we decided to cut the repo rate during the summer by a total of 0. 75 percentage points. the rate is currently at 2