In February the Riksbank introduced a new system which means that we publish a forecast for the repo rate together with a probability distribution. Previously the interest rate path has only been published in connection with the Monetary Policy Reports issued three times a year. But in September the Executive Board took the decision that the interest rate path and forecasts for certain key variables should also be published at the monetary policy meetings where no report was published. There are several advantages to the Riksbank publishing its own interest rate forecast. We can then explain more clearly to the general public and market agents how we view future interest rate developments, which makes it easier to evaluate monetary policy. Clearer communication should also mean that monetary policy becomes more efficient. Through the influence on interest rate expectations the Riksbank can to a greater degree influence interest rate setting in the economy. Another advantage of having our own interest rate forecast is that it becomes simpler to explain how we view the driving forces behind economic developments and also the objective and effects of monetary policy. At the same time, it should contribute to giving greater depth to the analyses and discussions of monetary policy conducted both within and outside of the Riksbank. Up to February this year, when I myself still worked as an analyst, I like many others tried to interpret the Riksbank’s communication and what it might mean for future interest rates.
My motives for the decision are expressed in more detail in the minutes from the meeting, so I shall not say very much on this point. The statistics received regarding developments in Sweden during the second quarter showed a slightly tighter labour market than we expected in June and unemployment was slightly lower than we were predicting (Figure 1). The hiring plans according to the National Institute of Economic Research’s business tendency survey for July also indicated that employment would continue to rise during the third quarter. At the same time, labour shortages in the business sector had continued to increase (Figure 2). I therefore repeated by view from June, namely that companies could be forced to increase their remunerations to obtain skilled labour. This could push up wage increases. If companies instead choose to lower their requirements regarding qualifications this could have an effect on productivity growth which would then risk being weaker than the development we envisaged. In both cases cost and inflationary pressures rise. According to the preliminary National Accounts, which were published in August, productivity showed much weaker development during the second quarter than we had predicted in June (Figure 3). But even if there was reason to believe that it would be short-lived, there is nevertheless considerable uncertainty regarding how productivity will develop in the future. And inflation, what has happened there? It had only been slightly higher than the forecast in June (Figure 4). However, companies’ costs had increased more rapidly than expected (Figure 5).