Goodhart and Rochet point out in their evaluation that the construction with mean squared deviations has its limitations, as it focuses on central expected outcomes and thus overestimates the certainty in comparisons of alternative outcomes and that the figures should be accompanied by fan charts that show the probability intervals for both production and inflation.25 I consider it important to calculate and report the uncertainty in the comparisons, if this type of figure is going to be used to a greater extent. 24  See the article “Evaluation of different monetary policy alternatives” in Monetary Policy Report, October 2009. 25  Op.cit., p 66. 8  BIS central bankers’ speeches  Develop the models so they can process different repo-rate paths We should develop our models so that they can process different repo-rate paths. One problem with regard to the base for monetary policy decisions is that the Ramses model can only process one repo-rate path. It cannot handle a situation where the Riksbank’s repo-rate path differs from the market’s repo-rate path. The repo-rate path used in a forecast with the Ramses model also implicitly determines the current longer-term interest rates along the entire yield curve, and these may differ from the interest rates currently observed in the market. This means that problems arise with regard to analysing developments, when the Riksbank’s repo-rate path differs from the market’s repo-rate path. Further development of the model would improve the base for monetary policy decisions.
If you are honest only in some places or circumstances, but not others—or only with some people, but not others —then honesty is hardly integral or integrated into your life and work. The importance of this particular meaning of “integrity” was made apparent to me on a recent visit I made to the United States Military Academy at West Point. The faculty and students there believe that strong individual ethics are what make large organizations like the U.S. armed forces succeed. The commitment of cadets to living the ideals of the institution was impressive and humbling. They embodied the word integrity—alignment of word and deed in all aspects of life. Another lesson that I took from West Point is that cadets commit to integrity because their careers—and, in combat, their lives—depend on others. We are in this together—this city, this industry, this country. And if we’re in it together, we all have to behave in ways that benefit the group.7 We have to behave in ways that merit the trust of others. Whether we are citizens or soldiers, the most important relationships in our lives are built on trust. In our personal lives, we take action when our trust has been betrayed. To reform financial services, we need to bring the same expectations of trust—and the consequences of a breach of that trust—to the office each day. If you would not tolerate a practice in your personal life, do not tolerate it in the office. Calling out bad conduct is not easy.