The most recent labour market statistics for the United States indicate a continued favourable development, although the monthly statistics for household consumption indicated some slackening of demand. The purchasing managers index for the manufacturing industry in March indicated a small decline for the United States, while the index continued to improve for the euro area. Other indicators for the euro area such as the European Commission’s surveys show a positive development recently. Growth in Asia has been stronger than we had assumed. All in all, my opinion is that international economic activity appears slightly stronger now than we assessed in the February Inflation Report. For Sweden, the assessment in the Inflation Report was that GDP growth would be relatively high in the coming years. Statistics Sweden has since then published national accounts for the fourth quarter  BIS Review 33/2006  5  of 2005. These figures show that GDP growth was somewhat lower than expected, although the outcome for earlier periods was revised at the same time in such a way that the growth for the whole year 2005 remainedl in line with the forecast. Recently, indicators have shown a relatively positive picture of the development of economic activity, for example, the business tendency survey, the retail trade index and statistics for foreign trade. The purchasing managers index for the manufacturing industry has, as has been the case in the euro area, indicated a clear improvement in industrial activity since the middle of last year and this development has also continued recently.
4  See the box ”Uncertainty regarding future interest rate movements”, in Inflation Report 2006:1. 4  BIS Review 33/2006  In the second method, the uncertainty interval is instead calculated with the aid of the market’s pricing of interest rate options. The current prices of interest rate options reflect expectations of future interest rates. This method is therefore forward-looking and based on the fact that the redemption price for identical options can vary. This variation reflects the market’s assessment of the uncertainty in the future price of the asset on which the option is based. Since this variation can be observed, it is possible to construct an uncertainty interval around the implied forward rate curve. These uncertainty intervals are largely similar to the uncertainty intervals based on historical deviations (see Figure 5). To summarise, the strategy for monetary policy is being maintained with the new interest rate assumption. We normally try to attain the inflation target within a two-year period and we take the real economy into consideration. However, monetary policy cannot as before be described by the simple rule of thumb that was based on the assumption of a constant repo rate. Instead the forecasts that are based on the assumption that the repo rate will follow implied forward rates are studied and assessed. It is the whole path of inflation and the real economy that is important in monetary policy decisions.