However, the development of the CPI cannot always indicate what monetary policy is needed at a particular time – no single inflation measure can do this. The Riksbank therefore uses different measures of underlying inflation to describe the trend rate of inflation and to justify the monetary policy decisions. Our most commonly used measure, with the rather difficult to pronounce name of UND1X, consists of the CPI adjusted for certain items that are affected by fiscal policy and monetary policy in a direct way. There are educational gains with using measures of underlying inflation. However, it can also create uncertainty as to how the inflation target is defined, even if we try to be clear about why a particular measure has been highlighted at a particular time. Such experiences have given us reason to think about how the need for various adjusted inflation measures can be reduced. One possibility could be to make forecasts covering longer periods. For the Riksbank the need to emphasise alternative measures of inflation growth has declined in that we have for some time now published forecasts of developments three years ahead instead of two years ahead. With a longer forecast horizon it is possible to illustrate more clearly when various shocks have effects that are temporary and how they dissipate over time without having any lasting impact on inflation. This makes it easier to explain whether or not the interest rate needs to be changed.
With assets managed by SWFs estimated at 3,000 billion dollars, this category of investors represents twice the value of assets managed by hedge funds. 1 It is estimated that they will continue to grow in the future, to reach from 12,000 to 15,000 billion dollars, depending on estimates, in 2015. Consequently, they play and will continue to play an increasing role in the global financial system. As SWFs have long-term and diversified investment strategies and are not subject to sudden fund withdrawals by customers, they are usually considered to have a stabilising effect on the global financial system, despite their lack of transparency. Consequently, developed countries have an interest in attracting their investments. During the crisis, the behaviour of SWFs has differed according to the country of origin, but in general, it appears that their tendency to invest more than before in domestic and regionally close markets during the first stage of the crisis has come to an end, and that they have now resumed investing principally in OECD economies. 2 This is particularly true for Gulf sovereign funds, where diversified domestic investment opportunities are scarcer than for Asian sovereign funds, for example. In the first quarter of this year, Europe was by far the leading destination for Middle-Eastern and North African SWF investment. 3 Muslim countries, in particular oil-exporting ones, represent as much as 51% of total sovereign wealth funds’ assets.