As for interest rates,  BIS Review 11/2007  1  going forward, it is not yet certain whether the US long rates would need to rise in order to facilitate the financing of the US current account deficit. This would depend essentially on the relative ease with which the US deficit can be financed. So, I think we need to watch these developments closely because financial markets can adjust much more rapidly than the real side of the economy. Turning to the Thai economy. Last year, the economy showed considerable resilience, notwithstanding many adverse shocks affecting it, especially the higher oil price and political uncertainties at home. Growth, estimated at about 5 percent last year by the market, is satisfactory while the second round effects of the oil price increase on inflation were well contained. Overall, the economy's fundamentals remain sound with economic stability intact. Last year, monetary policy in Thailand was focused on limiting the second round effects of the oil price increase on inflation. That focus I think was well met. Policy rate has been held steady from midyear last year, and since then, inflation pressure looks to be moderating. Latest data show a further consolidation of inflation in December. So, under the current softening trend, baring no surprises on the oil price, there is also a possibility that, in Thailand too, inflation could be less of a policy concern this year. Under this scenario, therefore, there could be greater room for monetary policy to aim for a balance between growth and inflation.
It was therefore sometimes perceived as unclear which expectations we meant when we commented on whether market expectations were reasonable. This gave rise to some criticism for unclear communication in 2005 and 2006. Using our own forecast for the repo rate removes the risk of being misunderstood for this reason. Experiences so far of our own interest rate path My impression is that the comments on the new system of publishing our own path for the repo rate have largely been positive, although there has also been some criticism. With regard to our concrete forecasts for the repo rate, the discussion has become livelier and we have heard more criticism. On the two occasions so far when we have presented a new assessment the monetary policy decision to raise the interest rate to 0.25 percentage points has indeed been anticipated and hardly been questioned. But our forecasts regarding future developments have surprised some market agents. 2  BIS Review 112/2007  The Riksbank’s forecast was a surprise in February The path for the repo rate that we presented in February was lower than the expectations that could be detected in the market pricing at that time. It was also lower than the average of the interest rate forecasts made by other forecasters. However, there were considerable differences between the different market analysts. Some had views relatively close to ours, while others differed substantially.