I would like to emphasise once again that this is a question of a forecast for the future development of the repo rate. Forecasts are, as we know, always uncertain and new information and changed circumstances can lead to assessments changing. The new interest rate assumption does not entail any commitment on the part of the Riksbank that the repo rate will actually follow a particular path. Nor does this involve a new way of conducting monetary policy. BIS Review 6/2007  5  When we chose to replace the assumption of a constant repo rate with an assumption based on market expectations, we took a large step towards increased openness and clarity. Now we are taking a further step in the same direction. I hope that this will enable us to become even better at explaining to the general public how we reason when making our monetary policy decisions. Thank you! List of references Alsterlind, J. and Dillén, H., “Monetary policy expectations and forward premia”, Sveriges Riksbank Economic Review 2, 2005. Archer, D. (2005), “Central-bank communication and the publication of interest rate projections”, article presented at the Riksbank’s conference “Inflation targeting: implementation, communication and effectiveness”, June 2005. Blinder, A., (2006), “Monetary Policy Today: Sixteen Questions and about Twelve Answers”, paper presented at the Banco de España Conference on “Central Banks in the 21st Century, Madrid, June 8-9, 2006. van der Cruijsen, C. and M., Demertzis (2005).”The impact of central bank transparency on inflation expectations”, Working Paper no. 031/2005, De Nederlandsche Bank, 2005.
Overall, the economy in the euro area stagnated. As in the last monetary policy assessment, we assume that the global economy will continue to recover slowly. This will be driven by globally expansionary monetary policy and strong domestic demand in the emerging economies. In the euro area and the US, developments are likely to be more subdued. Here we assume that the European financial and sovereign debt crisis will gradually ease. However, risks in this respect remain high. In particular, the difficult situation in Greece and Spain has already led to a significant deterioration in the  BIS central bankers’ speeches  1  confidence of households and companies in the euro area. As a result, the economic situation remains vulnerable. These high risks are also affecting the financial markets. Following a temporary recovery at the beginning of the year, the situation on the financial markets at present is again tense. A substantial correction has taken place on the share markets. By contrast, investments perceived to be safe, such as US, German or UK government bonds, recorded all-time low yields and correspondingly high price gains. Real yields on these investments are in negative territory for most maturities, measured in terms of inflation expectations. In addition, interest rates on money markets are at record-low levels worldwide. Swiss economic outlook In Switzerland, real GDP rose faster than expected in the first quarter.