Permit me to return to last year's discussion about energy prices in order to illustrate what I believe could be one of the problems. As I mentioned, the repo rate was not lowered in April 2003 despite the fact that our forecasts pointed to below-target CPI inflation two years ahead. The reason was that the forecast of CPI inflation was depressed by energy price effects that were judged to be transitory and that were expected to subside just beyond the forecast horizon. However, the measure that was considered a better reflection of longer-term cyclical inflation, UND1X excluding energy, was forecast to be in line with the inflation target at the end of the forecast period. One perhaps likely interpretation, and an interpretation that was obviously common, was that the Riksbank had not departed from its policy rule of adjusting the repo rate when inflation deviates from the target, but that the target variable itself had been changed. And since the new supposed target variable was in line with the inflation target there was no reason to change the repo rate. Our intention, however, was rather the reverse, i.e. to highlight UND1X excluding energy to point out that fluctuations in CPI inflation were driven to a great extent by temporary variations in energy prices, also somewhat beyond the normal two-year horizon, and that this was an occasion on which there was reason to depart from the rule.
Consequently, to this end, the June Inflation Report in 2001 presented an inflation measure that was  1  See Heikensten, L, "The Riksbank's inflation target - clarifications and evaluation", Sveriges Riksbank Quarterly Review 1, 1999. 2  BIS Review 26/2004  adjusted to exclude temporary rises in prices. On that occasion there was no forecast for this adjusted measure. The third and most recent example is when the Riksbank decided last year to highlight UND1X excluding energy as an especially important index for assessing longer-lasting inflationary pressures. Energy prices had risen steeply around the turn of the year 2002/2003. We judged this rise to be temporary and expected energy prices to fall back again. This meant that the inflation rate would come to be affected for a reasonably long period by these temporary fluctuations in energy prices. At the monetary policy meeting in April 2003 the Riksbank judged that inflation towards the end of the forecast period would be somewhat below target if the repo rate were left unchanged. A strict application of our simple rule would have resulted in a repo rate cut, but since temporary fluctuations in energy prices were the chief reason for the inflation forecast being below 2 per cent, the Riksbank decided to leave the repo rate unchanged.