##spera 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 are held approximately every other month. during this two - month period, new information on the development of the economy may emerge. if the riksbank is successful in communicating the principles for monetary policy, the market participants should be able to predict rather see t. jonsson and p. osterholm, “ the properties of survey - based inflation expectations in sweden ”, working paper no. 114, 2009, national institute of economic research. well how new information will affect the riksbank ’ s repo rate path. this should then help to ensure that there will be only small deviations between the market ’ s expectations on the day before the publication of a repo - rate path and the repo - rate path that the riksbank actually publishes. the

, 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. see m. andersson and t. aranki, “ a comparison of different forecasters ’ ability given the publication date effect ”, sveriges riksbank economic review, no. 1, 2009. the average error is calculated as the mean value of the forecaster's forecasting errors during the forecast period. the absolute average error means that the sign of the individual forecast deviations is not taken into account. 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