attains the economy ’ s long - term sustainable level, remains for the most part intact. … while the conditions for a turnaround in the euro area are poorer. the total international recovery expected during the coming year does not look to be as strong as the riksbank anticipated in december. the background to this is that developments in the euro area in general and in germany in particular look rather gloomier than they did before. the euro area ’ s export industry is hampered by international uncertainty, as well as a stronger euro and a weak labour market is affecting households ’ consumption and confidence in the future. this means that the international economic prospects look rather poorer now, which was also the conclusion of the executive board at its monetary policy meeting on 6 february. however, this assessment is based on the assumption that the iraq crisis will develop in a way that will not significantly deteriorate economic prospects. flat growth path for the swedish economy the financial unease has also affected the swedish economy. industrial production has stood still during the autumn and order books have been slow to fill. this is perhaps not so strange in the light of the “ wait - and - see ” mentality prevailing on important export markets. however, as the international economic climate improves, this and the cyclical pattern for investment are expected to give impetus to industrial production in sweden. over the past six months, swedish households have become increasingly pessimistic in their view of the future, which is perhaps understandable taking into account the negative news with which they are confronted : rising energy prices, higher taxes and expected cuts. the scope for consumption will be under pressure from these factors in the near future. at the same time, households ’ savings were at a high level in 2002, which means that there may be some scope to increase consumption despite the restraining effects. altogether, i believe there is also reason for a downward revision of the estimate of the swedish growth rate over the coming years. the expected upturn is assessed to be somewhat superficial. this also assumes that the iraq conflict does not develop in a way that will seriously deteriorate future prospects. the shaping of monetary policy a decisive factor in the shaping of monetary policy in future is the total picture of inflation prospects. a slightly more subdued growth in demand both in sweden and abroad is expected to lead to capacity utilisation being slightly less strained. at the same time, energy prices have pushed up inflation. however, the riksbank ’ s assessment is that the upturn in inflation

the bank makes clear whether it expects inflation to deviate from the target or not, given the current interest rate level. if the forecast is above or below target it shows clearly that there is reason to consider whether the repo rate needs to be changed. the framework applied by the riksbank has been the established practice in inflation - targeting countries. but as early as the mid - 1990s the reserve bank of new zealand, for example, opted for a the volatility, measured as the standard deviation of gdp growth, was 1. 9 percentage points during the period 1970 - 1992. since 1995 the corresponding standard deviation has been 1. 3 percentage points. see andersson, m., dillen, h. and sellin, p., ” the yield curve and the riksbank ’ s signalling ”, sveriges riksbank economic review 3, 2002, 5 - 19. different method, publishing forecasts based on the interest rate path that they thought gave the best target fulfilment. our academic advisers have also repeatedly said that we should prepare forecasts based either on how the market expects interest rates to evolve or that we, as in new zealand, should work out what interest rate path is consistent with reaching the inflation target. 4 against this background we at the riksbank have of course discussed over the years the question of what importance we should attach to different interest rate assumptions in our internal work and when we publish forecasts. when making decisions we have also had many other kinds of model - based estimates and scenarios to go on than those published. moreover, from october 1999 until march 2003, our inflation report contained boxes in which we published estimates based on a survey of market expectations of the repo rate. 5 the estimates were seldom given any great significance in the monetary policy debate, however. so what are the points of attaching greater importance to, and also publishing forecasts based on, other interest rate assumptions than a constant repo rate? there are chiefly two : the first point has to do with comparability and the possibilities to assess our forecasts. as things currently stand the riksbank ’ s forecasts can be difficult to compare with others, since other forecasters do not normally base their forecasts on an unchanged policy rate. this risks confusing those that monitor the riksbank and compare our forecasts with others in, for example, the media. so it is possible that an interest rate assumption that is more consistent with the market '