on demand. but interest rate increases by the riksbank may also be needed to assist demand ’ s adjustment to long - term growth. with the past and present upheavals in the swedish economy, however, it is particularly difficult to be clear about the exact timing. the riksbank should naturally not raise interest rates too early but not too late either. in my opinion, the time for another increase is coming closer, at least as long as demand growth remains strong. but today i find it hard to envisage a main scenario that unequivocally threatens price stability in the period of one to two years ahead that is our main concern. the executive board ’ s monetary policy discussions this autumn will clearly deal with conceivable threats to continued price stability. the risk spectrum has consequences for the formulation of monetary policy. it may include the future development of labour shortages and how wage trends are affected in alternative scenarios. although wage development has been stable to date, we must of course bear in mind that the labour market has not been tested in earnest. new wage negotiations will begin during the autumn. as always, the riksbank will be following them closely to divine whether the labour market situation in general constitutes a threat to price and wage stability. our discussion may also dwell on any risks to inflation in sweden in connection with the rising dollar. will the dollar remain high against the euro, as well as against the swedish krona? could that then have some impact on the feasibility of continued price stability in sweden? yet another risk is, of course, that the international price of crude oil does not fall back as most observers expect. it is not the oil price as such that is primarily important for the analysis but rather any impact it may have on other prices in the economy, for example wage increases. the discussion in the euro area has, moreover, highlighted the international crude oil price ’ s interaction with exchange rates. risks of these types have to be weighed against the probability of a faster correction of existing imbalances in the world economy, for instance the us current account deficit, the level of stock markets and the dollar ’ s exchange rate. assessing the likely course of such adjustments is exceptionally difficult. instead of attempting to predict such a course, which may be impossible, one needs to be alert to signs that it is appearing. concluding remarks the picture i have painted of the swedish economy is fairly bright but it is accompanied by a number of clearly identified risks. it looks

for house prices over the past 15 years, but periods of low interest rates are followed by periods of higher interest rates. norges bank ’ s policy rate is therefore of limited importance for house price inflation over a period of 15 to 20 years. the housing stock in norway, which numbers a good 2. 2 million dwellings, shows little change from one year to the next. as a result, higher demand for housing will primarily translate into higher prices in the short term. in the 1990s, housing starts in norway were fairly low in relation to growth in the number of households. moreover, population growth has been higher in recent years, largely reflecting a high level of immigration. in 2006, the population increased by more than 40 000 and the number of households by roughly 30 000. furthermore, migration patterns in norway follow the business cycle. migration to densely populated areas is now rising. demands for high standards and new building regulations have also pushed up housing construction costs and thereby house prices. the rise in house prices has been accompanied by a sharp increase in household debt. in norway, household debt is now almost twice the level of disposable income, and the debt to income ratio is the highest ever. it is higher than in sweden and the uk, but lower than in denmark and the netherlands. norway is among the countries with the highest share of owner - occupied dwellings, at around 80 per cent. this high proportion partly accounts for the high mortgage debt of households. in recent years, new loan products have also been launched, facilitating mortgage equity withdrawal. housing wealth has become more liquid. borrowers have greater scope for choosing repayment profiles. we cannot identify the exact level of household debt that can be sustained over time, but the rapid accumulation of debt increases household vulnerability. housing investment has been profitable in recent years. since 1992, the real rise in house prices has averaged 8 per cent, which is markedly higher than for the entire post - war period. at the same time, fluctuations in prices have been considerably smaller. the main determinants of house price inflation have long been income, unemployment, interest rates and residential construction. in the past year, however, house price inflation has been higher than implied by these factors. a large share of the increase in 2006 cannot be explained by previous patterns. developments since the beginning of the 1990s may have engendered expectations that house prices will only continue to rise. this may increase house purchases for pure investment purposes and induce younger buyers to enter the housing market