My view has been that the further appreciation of the Swedish krona has risked leading to impaired target fulfilment, and this has been the motivation behind my stance in favour of a lower repo rate path than that decided upon. Am I not concerned that a lower repo rate path would lead to excessive inflation, considering how inflation has increased recently due to higher energy and commodity prices? It remains to be seen how permanent these increases will be. In our most recent forecast, which assumed the stabilisation of these prices, underlying inflation, even in the main scenario, was estimated at less than 2 per cent for most of the forecast period (see Figure 2). On the basis of this forecast, there is thus scope for a more expansionary monetary policy. One matter that I intend to address at the next monetary policy decision is the wide gap between CPI inflation and CPIF inflation that we saw in January and February. This gap is partly due to a detail, related to mortgage costs, in the calculation method used, which also results in higher CPI inflation over the rest of the year than was forecast in the monetary policy report in February. However, in my opinion, the underlying inflationary pressure in the economy is still low, which, for example, is reflected by the low outcome for CPIF inflation. 2  BIS central bankers’ speeches  Monetary policy has to be forward-looking, as its influence on the economy is subject to a time-lag.
The difference in outcome between the two repo rate paths is partially due to the different development of the exchange rate, but it is, of course, also largely due to the divergence of the interest rates influencing investments and saving. 14  In the figure, foreign policy rates are obtained from adjusted implied forward rates at the date of the Monetary Policy Report. 10  BIS central bankers’ speeches  The exchange rate effects of choosing another repo rate path are naturally uncertain. However, the fact that the exchange rate in general is associated with great uncertainty does not mean that it can be disregarded when decisions are taken on the repo rate path. And, in my opinion, neither does the fact that market interest rates do not fully incorporate the repo rate path – possibly because they are influenced by foreign interest rates to a large degree – form a strong argument for disregarding the potential exchange rate effects of increased interest rate differentials. As a matter of principle, I consider that monetary policy should be a matter of choosing the repo rate path that gives the forecast for inflation and resource utilisation with the best target fulfilment when fully incorporated into expectations. Another principle is that high uncertainty is not an argument for refraining from using the best forecast as a basis for decisions.