Just focusing on one or a few forecast figures would make it difficult for policy-makers to transmit the complexity of monetary policy deliberations to the public in a precise and transparent manner. Over a medium to long-term horizon, inflation forecasts based on statistical analysis become very inaccurate. Yet, medium to long-run inflation expectations are crucial in guiding the consumption and investment decisions of private agents. In order not to lose sight of the low frequency developments that may influence inflation over longer horizons than are used in the forecasts, the ECB has reinforced its analytical framework with a monetary perspective. This ‘pillar’ looks at price formation from a medium to long-term standpoint and is intended to purge monetary policy from the risk of becoming unduly short-sighted and overreacting to the latest economic news. By constantly reminding the central bank that in the long run prices and money stock increases are correlated, the monetary pillar is a standing support to the ECB’s commitment to price stability at all horizons that are relevant for economic decisions. Taking decisions and evaluating their consequences on the basis not only of the shorter-term indications from the analysis of economic and financial conditions, but also of money and liquidity considerations, allows a central bank to see beyond the transient impact of the various shocks and to maintain a more steady policy course. Looking back over our first six years of operations, monetary analysis has helped to underpin the medium-term orientation of our monetary policy conduct.
2  See Giavazzi, F. and F.S. Mishkin (2006), "An evaluation of Swedish monetary policy between 1995 and 2005”, Reports from the Riksdag 2006/07:RFR 1, Committee on Finance. See also Sveriges Riksbank (2006), “Material for assessing monetary policy 2003-2005”, box in Inflation Report no. 1 and Sveriges Riksbank (2005), “Material for assessing monetary policy 2002-2004”, box in Inflation Report no. 1. 3  See the references in note 2. 4  BIS Review 52/2007  The Riksbank’s calculations imply, for example, that an interest rate a half a percentage point lower for six months would have led to lower unemployment corresponding to two or three tenths of a percentage point. However, I would like to emphasise that this type of calculation is very uncertain. Given this, I believe that monetary policy cannot be said to have contributed significantly to the high unemployment. What other possible explanations are there? What can explain the rise in unemployment? As I mentioned initially, unemployment was held down in the 1970s and 1980s with an economic policy that was not sustainable in the long term. I believe that this could have concealed structural problems in the labour market that only became visible when the economic policy regime was changed in the early 1990s. If one studies unemployment, particularly total unemployment, over a long period of time, one can see that it has shown a trend increase ever since the end of the 1960s. This also applies if one excludes the years after the change in economic policy regime.