, mentioned how we can assess effects in the longer term. since we cannot make meaningful forecasts for an unlimited period of time, we must restrict the forecast horizon. but this is not set in stone in the sense that it should prevent us from considering problems that may arise in a few years ’ time. moreover, there are risk scenarios that are difficult to capture in terms of forecasts. even if your ambition is to base the monetary policy decision on what are termed unbiased forecasts, in which upside and downside risks are balanced, you should be aware of the for a description of how decision - making data for monetary policy decisions are prepared, see the speech “ the monetary policy decision - making process ” by irma rosenberg held on 13 june 2008. bis central bankers ’ speeches difficulties involved. in practice, however, such forecasts have difficulties in capturing everything perfectly. in practice, you may wish to guard against some outcomes that you consider to be particularly harmful and that should therefore be avoided at all costs. for example, an unfavourable scenario in which a burst asset bubble leads to a deflationary situation that is hard to overcome will be assigned greater importance than a high - inflation scenario. experience from japan in the 1990s illustrates this. assessments of this type must be taken into account in the monetary policy decision. the moral of the story is that monetary policy cannot be reduced to a mechanical reading exercise. however well - prepared the material on which monetary policy decisions are based, there will always be complex and important aspects that policymakers must take a stance on. it is important that these aspects are discussed from several different perspectives. this is one reason why we have an executive board made up of economists with different backgrounds and expertise. it is beneficial and important for us to conduct a wide - ranging debate on monetary policy at the riksbank and not just externally. i believe that it leads to better monetary policy decisions. bis central bankers ’ speeches

it really that characterises a well - balanced monetary policy? it is normally a question of finding an appropriate balance between stabilising inflation around the inflation target and stabilising the real economy. it is difficult to translate what can be considered a well - balanced monetary policy in any given situation into precise and practical monetary policy. the intention behind stabilising inflation is relatively easy to understand, but the significance of stabilising the real economy is not so clear. in practice it is often interpreted as stabilising resource utilisation around its normal level. i think that is a fairly reasonable interpretation and it is not easy to argue for anything entirely different. at the riksbank we approach the concept of a well - balanced monetary policy by forecasting such things as inflation and resource utilisation for different monetary policy actions. after this we try to select the course of action associated with the best possible forecast outcome ; in other words the forecasts where inflation is best stabilised around the inflation target and resource utilisation around a normal level. this may sound simple and obvious but in practice is not that easy. in the first place, the best measure of resource utilisation is far from obvious and we executive board members may have slightly different opinions on this. 9 we are constantly working to improve the measures of resource utilisation and this is important. but as i see it implications, wiley 2003. lars nyberg discusses the balance sheet channel in more detail in the speech “ after the crisis – new thoughts on monetary policy ” published on 6 december 2010. for a more detailed discussion of how resource utilisation can be measured, see the speech “ potential gdp, resource utilisation and monetary policy ” by svante oberg held on 7 october 2010, and the article “ the driving force behind trends in the economy can be analysed using a production function ” in the monetary policy report of october 2010. bis central bankers ’ speeches we cannot give any single measure prime position as representing the one and only truth. it is wisest to continue using several different measurements as a guide. in the second place, situations sometimes arise where there is a conflict between stabilising inflation and normalising resource utilisation and different decision - makers may make different assessments. however, this has not been a problem recently as both underlying inflationary pressures and resource utilisation have been low. in the third place, in my opinion economic trends beyond forecast horizons should be taken into account, though