years will be largely as the leading forecasters believe. 2 see, for instance, rachel and smith ( 2017 ). 3 one example from the central bank world is that wilkins ( 2018 ) indicates that this will be an issue the next time the bank of canada ’ s monetary policy framework is evaluated, in 2021. 2 the repo rate will be somewhat higher given this, we can expect the repo rate to have been raised at least somewhat before the less favourable times arrive. most swedish forecasters, including the riksbank, are expecting the repo rate to be 0. 5 – 0. 75 per cent at the end of 2020. until then, almost all analysts believe that growth will slow down, but not to the extent that the swedish economy will enter a regular economic downturn before 2021. there are of course no guarantees, but this is how things look at the moment. neither is it possible for anyone to say how soon after 2021 a downturn may occur. it could come soon after, or some years later. 4 now 0. 5 – 0. 75 per cent is not a particularly high level for the repo rate, if one looks at it from an historical point of view. but on the other hand, history may not be as informative in this case as there has been a downward trend in global real interest rates in recent decades, as i just pointed out. it is therefore difficult to know what is currently a neutral, “ normal ” level for the repo rate. what one can say with some certainty is that it is much lower than it was 10 – 15 years ago. but even taking this into account, a repo rate of 0. 5 – 0. 75 per cent does not appear particularly high if an economic downturn were to occur in early 2021. how much is the interest rate usually cut in economic downturns? in sweden, it is not so easy to have a clear idea of this as we have had a floating exchange rate and an inflation target for just over 25 years, and that is not long enough to have experienced so many economic cycles. it is only when the exchange rate floats that one can use the policy rate to counteract economic downturns – when the exchange rate is fixed the policy rate is in principle locked on defending the chosen exchange rate. a couple of the rate - cutting phases we have had during this period have also been a little unusual. what happened in 1996 in particular, when the repo rate

to stimulate the economy even in times when the policy rate is at the lower bound. one advantage of the makeup strategy is that it can be applied within the framework of the current inflation - targeting policy. however, a condition for it to work is that it is a predictable element of the central bank ’ s policy. if one wishes to apply such a strategy, it would therefore be a good idea to formalise it in advance by means of a strategy document describing how the central bank will act in a situation where the interest rate is at its lower bound. 11 in a moment i will discuss a specific application of the makeup strategy. moderately strict odyssean forward guidance? when the central bank tries to give economic agents an idea of how the policy rate will develop, this is known as “ forward guidance ”. in sweden the riksbank publishes quantitative forecasts for the repo rate. this is called in academic literature delphic forward guidance, with reference to the oracle of delphi, who was 8 yellen ( 2018 ). the expression “ lower - for - longer ” is usually ascribed to reifschneider and williams ( 2000 ). for more detailed reasoning, see for instance soderstrom and westermark ( 2009 ). 10 this follows on from the so - called expectations hypothesis, which briefly says that longer interest rates are de - termined by expectations of the future policy rate. 11 yellen ( 2018 ) has proposed, for instance, that this could be done in the united states by means of a revision to the federal open market committee ’ s “ statement on longer run goals and monetary policy strategy ” or by publishing a separate supplement, “ committee guidelines for implementing policy at the zero lower bound ”. 6 thought to be able to see into the future. how well this strategy will function depends on how successful the central bank is at predicting its future interest - rate policy. if the forecasts for the policy rate are often correct, then it will be common for economic agents to believe in the central bank's forward guidance. but if the forecasts for the policy rate are not so accurate, then the forward guidance will be taken less seriously. and unfortunately it seems to be quite difficult to forecast policy rates. if the economy is hit by shocks, which is often the case, then the forecasts will not be very accurate. our experiences in sweden illustrate this problem clearly. both the riksbank and the market have often made substantial overestimates of