Investors will not invest unless reasonably confident that they understand the risks they are accepting (which, as recent events prove, isn’t the same as saying that investors will assess those risks accurately). Reducing those risks is one of the most productive activities that governments in the region can now engage themselves in.
In the second, the interest rate path is assumed to be in line with market expectations. And in the third, interest rates are assumed to follow the optimal path projected by the central bank based on the information available to it. The Bank of England carries out forecasts using the first two approaches.