Lars E O Svensson: Assessment of monetary policy in Sweden in 2009
Speech by Prof Lars E O Svensson, Deputy Governor of the Sveriges Riksbank, at the
Centre for Business and Policy Studies (SNS), Stockholm, 18 March 2010.
* * *
Carl Andreas Claussen and Gabriela Guibourg have contributed to this speech.
Assessments of monetary policy are important for several reasons. First, because the
Riksbank has had an independent position in relation to the Riksdag and the government
since 1999. This means, for instance, that the Executive Board makes the monetary policy
decisions without seeking or taking instructions. The Riksbank's independence gives its
governors a great deal of power. It is therefore also important that the activities of the
Riksbank can be monitored and assessed and that the governors can be called to account. A
high level of transparency and regular assessments are also necessary to maintain the
legitimacy of the Riksbank's activities. Second, regular assessments also help to ensure that
the Riksbank can develop its monetary policy analysis in the best possible way.
Every year, the Riksdag Committee on Finance examines and assesses the monetary policy
conducted by the Riksbank during the preceding years. The Riksbank compiles and
publishes material for this assessment. We published such material just a few days ago. The
main message in this material is that the Riksbank responded to the crisis by taking forceful
measures. The repo rate was cut to almost zero and the Riksbank announced its intention to
let the repo rate remain at this level for a relatively long period of time. The turbulence on the
financial markets also meant that monetary policy had less of an impact than normal. The
Riksbank responded to this by complementing monetary policy with extensive lending to the
banks. In this way, monetary policy has helped to dampen the fall in production and
employment. It has also helped to keep inflation in line with the target in the longer term.
This is what I intend to talk about today. First, however, I would like to say a few words about
some of the principles that are important when assessing monetary policy.
What should we consider when we assess monetary policy?
When can one say that the monetary policy conducted over the past year has been good?
The answer to this question naturally depends on what the target for monetary policy is.
The Riksbank has an explicit inflation target according to which the annual change in the
consumer price index (CPI) should be 2 per cent. As monetary policy acts with a time lag, it
should be based on forecasts. The Riksbank's forecasts are based on the assumption that
the repo rate - the Riksbank's policy rate - will develop in such a way that monetary policy
can be regarded as well-balanced. In the normal case, a well-balanced monetary policy
means that the inflation forecast is close to the inflation target a couple of years ahead at the
same time as the forecast for inflation and the real economy (production, employment and
unemployment) does not fluctuate excessively. It thus a question of finding an appropriate
balance between stabilising inflation and stabilising the real economy and resource
utilisation. The Riksbank therefore conducts what is generally referred to as flexible inflation
targeting.
One might think that it should be enough to simply compare the outcome for inflation with the
inflation target when assessing monetary policy. But it is not that simple, for two reasons.
The first is that it takes time for changes in the repo rate to have an effect on inflation and the
real economy. During this period of time, shocks may occur that can push the economy in a
different direction than was forecast. The monetary policy adopted may have been right, but
the Riksbank is unlucky and unforeseen shocks lead to inflation deviating from the target.
The monetary policy adopted may have been wrong, but the Riksbank is lucky and
unforeseen shocks nevertheless lead to inflation hitting the target.
The second is that flexible inflation targeting means that the Riksbank strives not only to
stabilise inflation around the inflation target but also to stabilise resource utilisation around a
normal level. This can sometimes entail a difficult balancing act. Shocks may, for example,
occur that make it difficult to quickly bring inflation to the target without creating major
fluctuations in the real economy. One may then choose to let the outcome for inflation
deviate from the target. This deviation is then deliberate and represents part of a
compromise between stabilising inflation and stabilising resource utilisation.
So, how should one assess monetary policy? Two approaches can be used. The first is to
assess monetary policy a couple of years after the monetary decisions concerned, so that
inflation and the real economy have had time to react to the monetary policy measures, and
to use all the information available at the time of the assessment, that is including the
information that has become available after the decision was made. This is, in other words,
an assessment after the fact, or what can be called an assessment ex post. Although it may
be very interesting to analyse the shocks that occurred after the monetary policy decisions
were made, it is practically self-evident that monetary policy could have been better if the
shocks that occurred later had been known at the time the decisions were made. An
assessment after the fact is not therefore necessarily the most relevant form of assessment.
A more relevant approach is to put ourselves in the position of the decision makers at the
time the decision was made and to try to assess the decision given the information that was
then available. In other words. perform an assessment based on the information available to
the decision makers, or what can be called an assessment ex ante. The question that should
then be answered is whether the analysis and the interest rate decision were reasonable
given the information and the forecasts available at the time. Did the Riksbank, for example,
arrive at a reasonable balance between stabilising inflation and stabilising resource
utilisation?
An assessment based on the information available to the decision maker also has the great
advantage that it can be conducted in real time immediately after the publication of the
monetary policy decision and the information and analysis on which the decision is based.
One does not thus need to wait for a couple years to see what the outcomes for inflation and
the real economy will be. The decisions of the Riksbank can therefore be assessed and
debated on an ongoing basis.
An important part of the assessment of a flexible inflation targeting policy is to assess how
credible the inflation target is, measured in terms of the extent to which various economic
agents' inflation expectations correspond to the inflation target. If inflation expectations are
stable close to the inflation target then the target is credible and it will therefore be easier for
the Riksbank to stabilise both inflation and resource utilisation.
As I have already said, it takes time for monetary policy to have an impact on inflation and
the real economy. Monetary policy is therefore governed by forecasts. It is a question of
choosing a repo-rate path so that the forecast for inflation and resource utilisation entails the
best possible stabilisation of inflation and resource utilisation. As the forecasts play such a
central role in the monetary policy decisions, it is of course important that the Riksbank
employs good forecasting methods and uses all the relevant information available when the
forecasts are produced so that they are as accurate as possible. An important step in the
assessment of monetary policy is therefore to investigate whether the forecasts are
reasonably accurate. One way to do this is to compare the Riksbank's forecasts with those of
other forecasters. The Riksbank makes such comparisons every year.
Another component of the assessment of monetary policy is to analyse how predictable
monetary policy is and what impact it has on market rates. Monetary policy mainly acts by
influencing expectations regarding interest rates, inflation and the real economy in the future.
Expectations regarding the repo rate in the years immediately ahead affect interest rates with
longer maturities, and therefore inflation and the real economy, more than the repo rate in
the period up to the next monetary policy decision. The predictability of monetary policy can
be measured in terms of how well the market predicts the next repo-rate path. How
effectively monetary policy steers market expectations and market rates can be measured in
terms of how closely the market expectations regarding future repo rates correspond to the
repo-rate path after it is published.
The Riksbank's material for the assessment of monetary policy in Sweden in 2009 is based
on the principles I have just described and this entails a certain renewal compared to the
assessments of previous years.1 I now intend to present the material for assessing monetary
policy in 2009 that the Riksbank published a few days ago. As you probably know, from and
including the meeting held in April 2009 I have entered reservations against the monetary
policy decisions and advocated a lower repo-rate path, on the grounds that this would better
stabilise both CPIF inflation and resource utilisation without leading to problems for financial
stability or the functioning of the financial markets.2 However, in my speech today I will focus
on the policy conducted by the majority of the Executive Board.
2009 - an extraordinary year for monetary policy
In 2009, the Riksbank continued to conduct an increasingly expansionary monetary policy.
The aim was to attain the inflation target and to mitigate the effects of the financial crisis on
the real economy. From February to the beginning of July, the Riksbank cut the repo rate
from 2.0 per cent to the all-time low of 0.25 per cent. The repo-rate path, that is the
Riksbank's forecast of the development of the repo rate in the years ahead, was also revised
downwards at every monetary policy meeting during this period. During the rest of the year,
the repo rate and the repo-rate path were left unchanged. As a result of the turbulence on the
financial markets, however, the impact of monetary policy was weaker than normal in 2009.
The Riksbank responded to these problems by complementing monetary policy with
extensive lending to the banks.
So, what was the nature of the forecasts and assessments that formed the basis for the
monetary policy decisions?
The repo rate was cut to 1 percent and the repo-rate path was adjusted downwards in
February
In February, it appeared that the downturn in economic activity, in Sweden and abroad,
would be more severe and would happen much more quickly than previously assessed by
the Riksbank. At the monetary policy meeting on 10 February, the Riksbank therefore
decided to cut the repo rate by a whole percentage point to one percent. The repo-rate path
was adjusted downwards and a further repo-rate cut during 2009 was indicated (see
Figure 1).
The Monetary Policy Report from February 2009 presented forecasts based on the Report's
main scenario and alternative forecasts based on the repo-rate path adopted at the meeting
in December 2008.3 These are shown in Figure 2.a, where the higher repo rate path (the
blue broken curve) represents the forecast from December 2008. The lower repo rate path
(the red broken curve) represents the Riksbank's main scenario from February 2009.
The Riksbank's inflation targets are expressed in terms of CPI inflation. However, this varied
strongly during the later part of 2008 and in 2009, due to the major changes in the repo rate.
This is because the CPI includes mortgage costs. In such a situation, it is reasonable instead
to look at inflation measured in terms of the CPIF, which excludes interest rate changes.
Figure 2.b illustrates the Riksbank's forecasts for CPIF inflation, based on the two repo-rate
paths. The lower repo-rate path, as proposed in the main scenario, gave an inflation forecast,
measured in terms of the CPIF, approaching 2 per cent two years ahead. The higher repo
rate path instead gave an inflation forecast that fell widely short of the target during the entire
forecast period. Equivalent forecasts for CPI inflation are shown in Figure 2.c.
The Riksbank uses a number of measures and indicators to measure resource utilisation in
the economy. One of these measures is the output gap, calculated as the percentage
difference between GDP and an estimated trend.4 If the gap is positive, this signifies that the
level of activity in the economy is high and that GDP is above its trend level. The opposite
applies when the gap is negative. Figure 2.d illustrates the output gap based on the two repo
rate paths. Both paths resulted in negative output gaps during the forecast period, that is to
say resource utilisation below the normal level. However, using the repo rate path in the main
scenario gave a less negative output gap, using this measurement method, than using the
repo rate path from December 2008. The lower repo-rate path thus stabilised both CPIF
inflation and resource utilisation better than the higher repo rate path.
Further repo-rate cuts in April and July
GDP continued to fall dramatically during the first quarter of the year, in Sweden as well as
abroad, and the GDP forecast for 2009 was revised further downwards compared to the
Riksbank's assessment in February. The Riksbank also assessed that CPI inflation would fall
very rapidly during 2009, which was largely due to the rapid interest rate cuts implemented at
the end of 2008 and start of 2009. At the monetary policy meeting on 20 April, the repo rate
was cut by 0.5 percentage points to 0.5 per cent. The repo rate was expected to remain at a
low level until the beginning of 2011 (see Figure 1).
In July, the assessment was that the decline in economic activity during 2009 would be
slightly deeper than the assessment made by the Riksbank in April. The Riksbank's
assessment was that the repo rate and the repo-rate path needed to be even lower. The
repo rate was cut by 0.25 percentage points to 0.25 per cent at the monetary policy meeting
on 1 July. The repo rate was expected to remain at this low level until the autumn of 2010
(see Figure 1). The Riksbank also assessed that the cut did not represent a threat to the
functioning of the financial markets. Furthermore, the Riksbank deemed that, following the
cut to 0.25 per cent, the repo rate had in practice reached its lower bound.
The alternative repo-rate paths published in the Monetary Policy Report in July and the
associated forecasts for CPIF inflation and the output gap are shown in Figure 3. The
majority of the Executive Board adopted the repo-rate path marked as the main scenario.
The situation on the financial markets in Sweden and abroad started to show signs of
improvement during the spring, but was still highly uncertain. Major divergences between the
market's repo rate expectations and the Riksbank's repo-rate path also arose during the year
(see Figure 4). This resulted in monetary policy having less impact than intended. Partly for
this reason, the Riksbank decided to lend up to SEK 100 million to the banks in the form of
fixed-rate loans at a maturity of 12 months. It was deemed that this measure could contribute
to lower interest rates on loans to companies and households.
The repo rate and the repo-rate path were left unchanged during the rest of the year
Following the decision in July, there were an increasing number of signs of a turnaround in
economic activity in Sweden and abroad. At the monetary policy meetings on 2 September
and 22 October, it was decided to keep the repo rate unchanged at 0.25 per cent. The
forecast for the repo rate was also held unchanged on both occasions (see Figure 1).
Figure 5 illustrates the alternative forecasts for the repo rate, inflation and resource utilisation
discussed at the monetary policy meeting in October.
As a complementary monetary policy measure, the Riksbank decided, on both occasions, to
make further fixed-rate loans of up to SEK 100 billion available to the banks for twelve
months.
The recovery from the deep recession continued during the autumn. At the Monetary Policy
Meeting on 15 December, the Riksbank resolved to leave the repo rate unchanged, at
0.25 per cent. The forecast for the repo rate was also held unchanged.
How can different monetary policy alternatives be assessed?
In connection with every monetary policy decision, the Executive Board makes an
assessment of the repo-rate path needed for monetary policy to be considered to be
wellbalanced.
One natural way of assessing which repo-rate path is best in a given situation is to compare
the forecasts for inflation and resource utilisation for alternative repo-rate paths. Such a
comparison can be found in Chapter 2 of the Monetary Policy Report and in the material for
the assessment of monetary policy in 2009 that was recently published by the Riksbank.5
The alternative scenarios are usually presented in the form of figures that show the forecast
for inflation and various measures of resource utilisation that a particular repo-rate path is
expected to give rise to.
A box in the material for assessing monetary policy in 2009 describes a method for
summarising the information in the alternative forecasts. This method uses an easily-grasped
measure, a so-called mean squared gap, of how effectively an interest rate path can stabilise
inflation around the inflation target and resource utilisation around a normal level.6
Allow me to illustrate the method by using an example from the Monetary Policy Report
published in October 2009, in which a box presented the method. Figure 6 shows the
forecast development of inflation measured in terms of the CPIF and resource utilisation
measured in terms of the output gap for the various repo-rate paths discussed in the
Monetary Policy Report of October 2009.
The various repo-rate paths are shown in Figure 6.a. The path in the middle is that of the
main scenario, the repo rate path that the majority of the Executive Board chose at the
meeting in October. The lower path is the one I advocated.
Figure 6.b shows the forecasts for CPIF inflation that each repo-rate path was expected to
give rise to.7 The output gap, which is shown in Figure 6.d, is calculated in the same way as
in the figures I presented earlier.
Figure 6.c shows the mean squared gap. A lower mean squared gap for inflation entails a
better acquisition of the inflation target; that is a better stabilisation of inflation around the
inflation target. A lower mean squared gap for resource utilisation entails a better stabilisation
of resource utilisation around a normal level. Consequently, the closer a point lies to origo, or
"south-west" in the figure, the smaller are the total deviations of inflation from the inflation
target and of resource utilisation from a normal level.
From Figure 6.c, it can be seen that the lower repo-rate path from the alternative scenario in
the Monetary Policy Report of October 2009 was closer to origo in both dimensions when
inflation is measured in terms of the CPIF. It thus stabilises both inflation and resource
utilisation better.
However, the assessment of the majority of the Executive Board was that the lower repo-rate
path was not appropriate. At the monetary policy meetings held during the course of the
year, the view of several members of the Executive Board was that the effects of the very low
repo-rate levels on the economy and the financial markets were uncertain and that there was
therefore reason to be cautious about reducing the repo rate below 0.25 per cent.
It is not easy to make reliable estimates and forecasts of potential production and resource
utilisation. The Riksbank's estimates and forecasts for potential production and hours worked
are in need of improvement and development. Such development work is currently
underway. In 2009, the financial crisis reduced potential production so that resource
utilisation in the economy is not as low for a given level of production as before. There is no
doubt, however, that resource utilisation is very low and will remain lower than normal during
the forecast period (see Figure 7).
The numerical inflation target has entailed great progress for practical monetary policy and
made it possible to measure and evaluate the target fulfilment of monetary policy in a much
more efficient manner than before. However, the fact that monetary policy is not just directed
towards stabilising inflation, but also towards stabilising resource utilisation has, in the
absence of quantitative measures of stability in these variables, made it difficult to measure
and evaluate target fulfilment in this stability dimension. Quantitative measures such as the
mean squared gaps make it possible to measure and evaluate this target fulfilment, however.
Work is now underway at the Riksbank to determine how such measures can be used. The
results of this work will be successively reported in the Monetary Policy Report and in other
documents published by the Riksbank.
How did the outcome for 2009 compare to our forecasts?
Inflation far below the target and a record fall in GDP
The rate of inflation, measured as the change in the CPI, averaged -0.3 per cent in 2009; it
was thus far below the inflation target of 2 per cent. This is explained - as I have already
mentioned - by the Riksbank's substantial repo-rate cuts, which began in the autumn of
2008. The Riksbank's repo-rate cuts led to lower mortgage rates and mortgage rates are
included in the CPI. Measured in terms of the CPIF, which is the CPI with a fixed mortgage
rate, inflation was more stable and averaged 1.9 per cent in 2009.
The repo-rate cuts in 2008 and 2009 were made in the full realisation that CPI inflation would
be low. In the longer term, however, the repo-rate cuts will help to keep CPI inflation up in
line with the target. The fact that CPI inflation was far below the target can thus be seen as
the result of a deliberate monetary policy from the autumn of 2008.
GDP fell by 4.9 per cent in 2009. This is the largest fall in Swedish GDP in a single year in
modern times. Average unemployment increased by approximately 2.2 percentage points
during the year and amounted to 8.4 per cent in 2009. Both employment and the number of
hours worked fell significantly. The reason that Sweden was so hard hit by the global crisis is
that the Swedish economy is highly dependent on exports. The effect on GDP was reinforced
by the fact that the households increased their saving. Companies also sold from stock to a
great extent during the year, thus reducing investments in stock and contributing to the fall in
GDP.
The impact of the financial crisis surprised all the forecasters
The turmoil on the financial markets has been part of the picture and has influenced
monetary policy and the forecasts since 2007. It nevertheless came as a surprise that the
situation would deteriorate as dramatically as it did in the autumn of 2008 and result in such
a dramatic fall in production around the world. Neither the Riksbank nor other analysts
predicted the strength of the global financial crisis and how much it would affect inflation and
the development of the real economy.
Figure 8 shows the forecasts for average CPI inflation in 2009 made by various forecasters
during 2008 and 2009.8 The figure shows that the pattern over time is roughly the same for
all the forecasters. During the first half of 2008, most forecasters expected that inflation
would be between 2 and just below 3 per cent in 2009, while the actual outcome was
-0.3 per cent. The explanation for this overestimation is that the forecasters did not foresee
that the financial crisis would take such a dramatic turn in the autumn and, consequently, that
inflation would fall so quickly as a result of the Riksbank's repo-rate cuts. Once the financial
crisis was upon us and the dramatic downturn in economic activity that followed in its wake
had begun, all of the forecasters revised their forecasts downwards quickly and substantially.
From the beginning of 2009, the forecasts were gathered around the actual outcome.
Figure 9 shows the forecasts for GDP growth in 2009 made by various forecasters in 2008
and 2009. In this case, too, it is clear that the forecasts follow a common pattern. Initially, the
forecasters tended to overestimate GDP growth in 2009 During the first half of 2008, they
estimated on average that growth in 2009 would be approximately 2 per cent. As it appeared
that the financial turmoil would dampen growth in both Sweden and abroad, the GDP
forecasts were gradually revised downwards. After April 2009, many of the forecasts were
gathered around the actual outcome for GDP growth, which was -4.9 per cent. However,
most of the forecasters revised their forecasts upwards towards the end of the year and were
thus surprised by the lower outcome.
All in all, it can be noted that the Riksbank overestimated the outcome for inflation in 2009 to
approximately the same extent as the average for other forecasters, although with the
exception of July and September 2008 when the Riksbank's forecasts overestimated the
prospects for inflation to a higher degree than other forecasters (see Figure 8). This was
because energy prices increased more than expected during the spring, which led to inflation
reaching over 4 per cent in the summer of 2008. The Riksbank thus saw a risk that the
substantial increases in the prices of food and oil would also lead to rapid increases in other
prices. Unusually high inflation expectations also contributed to this assessment.
With regard to the outcome for GDP growth, the Riksbank's overestimation was
approximately the same as the average of the other forecasters. All of the forecasters
continued to overestimate GDP growth for 2009 even during the first quarter of 2009. In other
words, no forecaster predicted the economic downturn sooner than any other.
How accurate are the Riksbank's forecasts?
As monetary policy is based on forecasts it is important that the Riksbank's forecasts are
acceptably accurate. However, it is not possible to assess accuracy by analysing the
forecasts for a single year. Even forecasters with a good average accuracy may be less
successful in an individual year. A fairer assessment requires a longer observation period.
A fair comparison of the accuracy of different forecasts should take into account the fact that
the forecasts are made at different points in time and that different forecasters therefore do
not have the same information available to them. In the comparison of forecasts made in the
material for the assessment of monetary policy, a method is used that takes such differences
into account.9
Figure 10 shows an adjusted absolute average error for the inflation forecasts for the period
1999-2009, that is the absolute forecasting error for CPI inflation adjusting for differences in
the forecast horizon.10 The shorter the bar, the smaller the forecasting error and the higher
the accuracy of the forecast.
The major forecasters - the Swedish Ministry of Finance, the National Institute of Economic
Research and the Riksbank - are reported individually, while the others are reported as an
average. It may be worth noting that the Riksbank's forecasts up to the third Inflation Report
of 2005 were based on the assumption of an unchanged repo rate during the forecasting
period. This may have hampered the accuracy.
The differences between different forecasters are small and it is hard to find significant
variations. The forecasts of different forecasters tend to follow each other relatively closely,
as indicated in Figure 8. In the material for the assessment of monetary policy there are
similar figures for the forecasts for GDP growth and unemployment (see Figure 11 and
Figure 12). Taken together, these figures show that the Riksbank, just like other forecasters,
tended to overestimate CPI inflation and GDP growth and to underestimate unemployment
during the period 1999-2009.
With regard to forecasts of the repo rate it is still too soon to compare the forecasting
performance of various forecasters as the Riksbank has only published repo rate forecasts
for three years. With such a short assessment period, chance plays too large a role to make
it meaningful to draw any general conclusions about forecasting performance. Figure 13
nevertheless shows the accuracy of the forecasts for the repo rate in the period 2007-2009
for those forecasters that publish such forecasts.
On average for the three years, all of the forecasters have tended to overestimate the repo
rate, but the Riksbank has the largest forecasting error of the five forecasters. The main
reason for the Riksbank's relatively larger forecasting error during this period is the
previously mentioned overestimation in the forecasts for CPI inflation in July and September
2008. On these occasions, the Riksbank's forecasts overestimated the prospects for inflation
to a greater degree than those of other forecasters. As I said earlier, the overestimations
were due to concern on the part of the Riksbank that significant increases in the prices of oil
and food during the spring, in combination with unusually high inflation expectations, would
lead to an increase in inflation.
The credibility of the inflation target
Confidence in the inflation target in the form of stable inflation expectations close to the
target is fundamental to the Riksbank's efforts to achieve price stability and stable resource
utilisation. This is because inflation expectations affect wage formation and pricing. Stable
inflation expectations thus contribute to stable inflation.
A high level of credibility for the inflation target also increases the possibility of the Riksbank
to stabilise resource utilisation. If an increase in inflation was rapidly reflected in higher
inflation expectations, the Riksbank would be forced to act more quickly and more forcefully
than would otherwise have been necessary to dampen demand and prevent the inflationary
impulse gaining a lasting foothold. The fluctuations in the real economy would thereby be
greater than if inflation expectations were better anchored. Establishing credibility for the
belief that inflation will be keep low and stable is therefore important in the effort to increase
macroeconomic stability.
If inflation expectations as indicated in various surveys are stable and close to the inflation
target a few years ahead, this can be interpreted to mean that the public is confident that the
Riksbank will achieve its target. The surveys that TNS Sifo Prospera has carried out of
inflation expectations among money market agents, employer and employee organisations
and purchasing managers in the retail sector and the manufacturing industry show that this is
the case. Figure 14 shows average expectations regarding CPI inflation for one, two and five
years ahead among all of the participants in the Prospera survey. Inflation expectations five
years ahead are close to 2 per cent, which shows that the credibility of the inflation target is
high.
Inflation expectations for shorter horizons are based to a greater degree on current actual
inflation.11 The exceptional circumstances for monetary policy that have followed in the wake
of the financial crisis, with substantial and rapid cuts in the repo rate, have pushed down CPI
inflation to unusually low levels. This, together with the severe downturn and the uncertainty
that prevails concerning the recovery of the economy, means that it is hardly surprising that
short-term inflation expectations are now below the target.
How well did the market's expectations regarding the repo rate match the Riksbank's
repo-rate path?
Since February 2007, the Riksbank has published its own forecast of the development of the
repo rate in the period ahead. A published repo-rate path makes it easier to explain the
Riksbank's view of developments and its reasoning to the public and the financial markets
when the monetary policy decisions are made. The aim is to improve the Riksbank's ability to
steer expectations regarding the monetary policy that will be conducted in the future.
Expectations regarding the repo rate influence the more long-term interest rates which in turn
are important to the economic decisions of the households and companies.
The Riksbank updates its repo rate paths at the monetary policy meetings, which a