It presupposes that the general public has ample opportunity to insight into our activities and that we are regularly  2  BIS Review 22/2008  examined. So assessment is important to us – both from an efficiency perspective and a democratic perspective. However, for the assessment to meet these purposes, there are a couple of factors to be taken into account. What can monetary policy achieve? To begin with, the demands – the actual base for the assessment – should be founded on what monetary policy can actually achieve. Monetary policy is able to secure an inflation rate that is in line with the inflation target over a number of years. It can also contribute to stabilising cyclical fluctuations in production and employment. However, monetary policy cannot achieve a permanently higher level of employment or growth in the economy. Both previous experience and economic theory have shown this to be the case. And this was one of the reasons why it was decided when drawing up the Sveriges Riksbank Act that it would be inappropriate for the Riksbank to have an explicit target regarding, for instance, GDP growth or employment, in addition to the price stability objective. It would then appear natural to assess monetary policy by looking at the way in which the inflation outcome relates to the Riksbank’s inflation target. But there are some factors here too that should be borne in mind. In retrospect One such factor is that efficient inflation targeting by necessity must be based on forecasts of economic development.
The most recent example was ordering the more detailed material for assessing monetary policy which the Riksbank published about a week ago. I shall return to this assessment later. But first I would like to say a few words about current monetary policy. Our most recent assessment Our most recent interest rate decision was not an easy one. There is considerable uncertainty, for instance, on which direction international economic activity will take. And, as you are aware, we also had slightly differing opinions within the Executive Board. However, we must nevertheless make a decision and the majority of us reached the assessment that the repo rate should be raised to 4.25 per cent. We are forecasting that the repo rate will remain around this level over the coming year. This type of interest rate development will contribute to inflation falling back and being around the 2 per cent target a couple of years ahead, at the same time as production and employment develop in a balanced manner. Different forces are pulling in different directions In our decision we weighed together many different factors. A lot has happened; both events that could push up inflation and events that could hold it back. On the one side were conditions implying a higher interest rate. Inflation rose rapidly in 2007 and we are expecting it to remain high over the coming year. Expected inflation has also risen and cost pressures are high. Economic activity in Sweden remains good and the labour market is strong.