To this end, we now release copious amounts of information, including the forecasts of economic activity and the year-end level at which we see the rate on overnight money trading, as foreseen by each individual FOMC participant under his or her assessment of appropriate monetary policy. We call this exercise the Summary of Economic Projections, or SEP for short. We release it quarterly. I draw your attention to it because it has become something of a phenomenon among analysts preoccupied with the entrails of policymaking and has taken on a life of its own. You read about it in the papers and get analysis of it from market soothsayers. Yet, I want to caution you against becoming overly preoccupied with the FOMC’s SEP. In my less than humble opinion, it is a flawed tool. Let me explain why. Here is what the last SEP release for the fed funds rate looked like. It provided the FOMC participants’ projections for the overnight rate at year-end for the next three years and beyond to the “longer run,” as foreseen from March 19:  1  4  See “Forward Guidance,” by Richard W. Fisher, remarks before the Asia Society Hong Kong Center, Hong Kong, April 4, 2014, www.dallasfed.org/news/speeches/fisher/2014/fs140404.cfm.
As the Swedish krona is judged to be undervalued at present, we also assume that the exchange rate follows a path that represents a gradual appreciation. The technical assumption of an unchanged repo rate and the presumed path for the exchange rate are then incorporated in the main scenario for inflation. As inflation’s future course is not a straightforward matter, we also include assessments of uncertainties. The overall picture of inflation prospects amounts in practice to an estimate of probabilities. The assessments in the main scenario imply favourable economic fundamentals: a growth rate between 2.5 and 3 per cent between 1998 and 2000, low inflation and a rising government surplus. Domestic demand in the main scenario is expected to generate a relatively limited increase in inflation’s underlying rate, from 1.1 per cent at present to 1.6 per cent at the end of next year and 2 per cent in the autumn of 2000. The 12-month change in CPI inflation is expected to be somewhat below the inflation target in one to two years time but the figure at the end of the period is judged to be approximately 2 per cent. All this means that at the end of the period under review, inflation is relatively well in line with the Riksbank’s target. It should be underscored, however, that the assessment of inflation prospects is more difficult than usual on account of the financial turbulence.