rate curve. we should also describe the uncertainty in comparisons of different repo - rate paths. monetary policy is a more or less continuous process. we normally make decisions on the repo rate and renew our assessment of the repo - rate path every second month. there is always considerable uncertainty over economic developments, particularly in the longer run. but that does not matter so much. we gradually adapt our monetary policy to new information and new forecasts to be able to keep inflation close to the target and resource utilisation at a sustainable level. bis central bankers ’ speeches figures figure 1. gdp calculations in the long - term surveys gdp at fixed prices, index 1970 = 100 outcome lu70 lu75 lu78 lu80 lu84 lu87 b lu87 r note. r refers to the reference alternative and b to the balance alternative. sources : ministry of finance and statistics sweden figure 2. forecast for gdp according to the convergence programme gdp at fixed prices, index 1994 = 100 outcome convergence report 1995 sources : ministry of finance and statistics sweden bis central bankers ’ speeches figure 3. gdp with uncertainty bands annual percentage change, seasonally - adjusted data - 2 - 2 - 4 - 4 90 % 75 % 50 % outcome forecast - 6 - 8 - 6 - 8 sources : statistics sweden and the riksbank figure 4. cpi with uncertainty bands annual percentage change 90 % 75 % 50 % outcome forecast - 1 - 1 - 2 - 2 sources : statistics sweden and the riksbank bis central bankers ’ speeches figure 5. cpif with uncertainty bands annual percentage change 90 % 75 % 50 % outcome forecast sources : statistics sweden and the riksbank figure 6. forecasting performance for gdp and cpi 1 - rmse / sd, number of quarters ahead in time gdp cpi 0. 8 0. 8 0. 6 0. 6 0. 4 0. 4 0. 2 0. 2 note. prior to the vertical line, the forecasts partly contain outcomes. sources : the riksbank and own calculations bis central bankers ’ speeches figure 7. forecasting performance for gdp, cpi and unemployment 1 - rmse / sd, number of quarters ahead in time gdp cpi unemployment 0. 8 0. 8 0. 6 0. 6 0. 4 0. 4 0. 2 0. 2 note. prior to the vertical line, the forecasts partly contain outcomes. sources : the riksbank and own calculations figure 8. repo rate with uncertainty bands per cent, quarterly

enormous. contracts that would have taken some time to establish themselves in a pit can be quickly listed on screen at relatively little cost. trading is now possible in such diverse commodities as electricity, telecoms bandwidth and even the weather. the organisers of this event may, in future, be able to hedge their exposure to fluctuating wine prices using exchange - traded futures based on the finest premier cru, i suspect this is one contract where traders would be happy to go to physical delivery. we central bankers will have to stick to our usual vin ordinaire. in any event it will be fascinating to see what other contracts emerge over the coming months. of course, not all contracts that are launched will be successful, and it ’ s interesting to reflect on what makes a successful derivative contract. lessons can often be learned from looking back to the past. not far from this location is the home of the london metal exchange. its origins can be traced back to 1571, when traders in metal and a range of other commodities began meeting at the royal exchange. what was originally a domestic market in physical metal became a major global market, and by the early 19th century traders had been forced to use nearby coffee shops. as the uk started importing large quantities of metal from abroad during the industrial revolution, the need emerged for importers to protect themselves against price movements during the long voyage from places like chile and malaysia. the “ futures ” market which developed from those humble beginnings continued to grow and, in 1877, the london metal exchange company was formed. that market was successful for a number of reasons. volatility in the price of the underlying product made the contract attractive to hedgers and speculators alike. technology - the telegraph would you believe! - encouraged the market ’ s growth by making shipment arrival dates more predictable. the lme had a first mover advantage that still stands. liquidity flourished as traders followed one another in using the new market. so there are a number of lessons for today ’ s exchanges, to do with the need to respond to market needs, the need to make full use of available technology, and so on. role of clearing houses it will be very little surprise to many of you that, as the central bank, the aspect of these developments which interests us most is the management of risk. clearing houses have traditionally played a central role in the derivatives markets and continue to do so as those markets expand. they are also increasingly active in the underlying cash markets.