central banks with a price stability target should be with regard to their own view of future developments in the policy rate. this discussion is also connected with which assumption for the policy rate the central bank should use when making forecasts of inflation and the real economy. three different approaches exist : ( i ) that the policy rate is assumed to remain unchanged during the forecast period, ( ii ) that the policy rate is assumed to follow market expectations, or ( iii ) that the policy rate is assumed to follow a path that the central bank itself considers to reflect a reasonable future development. 3 regardless of which of these three interest rate assumptions is used to produce the inflation forecast, the monetary policy decisions made by the central banks always refer only to the current level of the policy rate, that is, the level that is to apply until the next decision - making point. 4 however, the monetary policy discussion and communication differ slightly, depending on which interest rate assumption is used. see the minutes of the executive board meeting on 16 january 2007. see, for instance, eijffinger, s. and p., geerats, ( 2006 ), as well as van der cruijsen, c. and m., demertzis ( 2005 ). see, for instance, blinder, a., ( 2006 ), and kontulainen, j., d., mayes and j., tarkka, ( 2004 ). there are special exceptions to this normal procedure. for example, during the deflation crisis in japan, the japanese central bank undertook to maintain its policy rate at a low level during a certain period. for another exception, see the statement in a press release from the federal reserve, board of governors, 12 august 2003, in connection with fears that inflation would be too low. the first two approaches mean that a particular path for the development of the policy rate is taken for granted by the central bank when making its inflation forecasts. the latter approach instead means that the central bank makes its own assessment of what might be a reasonable future development in the policy rate at the same time as it makes the inflation forecast. the assumption of a constant policy rate has been the most common approach, although the trend at present is for the central banks to be clearer as to how they envisage future interest rate developments. several central banks have changed over to basing their inflation forecasts on market expectations of future developments in the policy rate. when the inflation forecast

see, for instance, giavazzi, f. and f. s. mishkin ( 2006 ). see, for instance, giavazzi, f. and f. s. mishkin ( 2006 ). however, it is not possible to entirely rule out similar problems sometimes arising even when the central bank publishes its own forecast for the policy rate. if new information is received in connection with making a decision on the interest rate and this information changes the conditions for decision - making, the decision may be different from what might have been expected on the basis of the inflation forecasts ( which have to be completed before the interest rate decision is made ). the advantages of the central banks publishing their own interest rate forecasts are discussed in more detail in, for instance, a number of essays presented at a conference organised by the riksbank in june 2005. see in particular archer, d. ( 2005 ), faust, j. and e., leeper ( 2005 ), svensson, l. e. o., ( 2005 ) and woodford, m., ( 2005 ). see goodhart, c., ( 2001 ) and mishkin, f. s., ( 2004 ) for a detailed argument against central banks publishing their own interest rate forecasts. this is not a simple matter. however, we executive board members have made the assessment that these problems are not in practice so great as to prevent us from agreeing on a path that a majority of the executive board members can support. we have previously managed to agree on interest rate messages with information on our future intentions when we have commented on the plausibility of the interest rate path given by market expectations. there are also some other problems that have been put forward as arguments against central banks publishing their own interest rate forecasts. one such argument is that it makes communication with the general public more difficult. if the central bank first announces a particular interest rate path and then new information is received, which leads to a policy rate decision that differs from the path published earlier, this could be perceived as a failure on the part of the central bank and it could damage the bank ’ s credibility. 11 personally, i do not believe that this will be a major problem. on the contrary, one of the main points of publishing one ’ s own interest rate path is that it should improve communication with the general public. we have always carefully emphasised that there is considerable uncertainty in the assessments and explained that