. for arguments in favour of this hypothesis in research, see for instance blinder, a. s., and j. morgan, ( 2005 ), “ are two heads better than one? monetary policy by committee ”, journal of money, credit, and banking, vol. 37, pp. 789 – 812. bis central bankers ’ speeches on the other hand, this should not mean that monetary policy becomes unclear, that it is characterised by more or less loose opinions – and that it thus becomes more difficult to understand and thus to assess. ultimately, it is the confidence of the general public that is at risk here ; the legitimacy of monetary policy. this was strongly emphasised when the inflation - targeting regime was introduced. the riksbank then put considerable energy into explaining what inflation targeting was all about and this probably contributed to the relatively quick acceptance of this policy. now the inflation - targeting policy is much more established, but there is of course still a need for clarity and structure. so although i have highlighted some of the problems regarding drawing parallels between theoretical analysis and practical monetary policy, this should not be interpreted to mean that i do not think that theory has a role to play. i am convinced that, used wisely, it can provide good support when explaining and assessing monetary policy. but exactly how theory can be used in the practical work, and exactly where the optimum balance lies between diversification and clarity, or between the degree of freedom and structure in an uncertain world is something that every central bank must try to ascertain. i can assure you that this is something we have considered at great length at the riksbank. it is also an important part of the work on reviewing the decision - making process that i mentioned earlier. i do not believe it is possible to capture everything with the aid of two aggregates. now and then something is likely to disappear on route. new challenges – the importance of managing systemic risk i have so far only discussed “ traditional ” complications in the step from theory to practice. i have given examples of challenges we have faced more or less continuously since inflation targeting was introduced. but if we look ahead, it is likely that the picture will be further complicated by the changes that will follow in the wake of the financial crisis. what i am mainly thinking about here is the increased focus on macroprudential policies. after the financial crisis we have learnt two main lessons. the first is that the central banks ’ interest rate - setting must

in 1999 there was a more or less explicit aim that it would consist of people with different backgrounds, experience and knowledge. this type of diversification appears to be something that most countries with monetary policy committees strive to attain. one reason for this is that there is a widespread belief that committees tend to make better decisions than individual policymakers, as a committee can “ pool ” its experiences and knowledge. 8 the decision can thus be made on a broader and better basis. as the saying goes : “ two – or rather more – heads are better than one ”. and in order to have something to “ pool ”, the people on the committee should not be too alike. if they all are cast in the same mould and think in the same way, one might just as well have one single policymaker. if there are so many different wills and ways of thinking, how can we actually manage to agree on a detailed, quantified forecast and an exactly determined repo rate path? also here we can receive guidance from the survey i mentioned earlier. one question in the survey was whether the members had refrained from entering a reservation against one or more monetary policy decisions, despite considering that another decision than the majority view would have been better. seven of the members, that is, more than half of them, replied that they had. the most important motivation given for this was that they said there was some “ bargaining margin ” in the repo rate decisions and that the decision reached was sufficiently close to what they would have advocated. in terms of the mean squared gap analysis, one could express this as the members actually preferring different dots, but given that the main scenario dot was sufficiently close to their own, they accepted the main scenario. i believe that this is a fairly important insight : the forecasts we present are often a compromise and an approximation. they point to the probable and desired direction, but the exact figures should probably be taken with a pinch of salt. an important balancing act at the same time, it is important to realise that the problem that constantly lies below the surface is how to find an appropriate balance between what one could call diversification and clarity : on the one hand the central bank wants to benefit from the fact that the decisions are made by a committee. we are not supposed to be cast in the same mould. there should thus be a sufficient degree of freedom and scope for individual members to make their own analyses, draw their own conclusions and make decisions as they see fit