It is therefore of course desirable that the extended repo-rate path is perceived as credible. As I mentioned earlier, it is possible that the extended repo-rate path with an unchanged repo rate further ahead would be perceived as less credible than a lower repo-rate path with a reduced repo rate now. In this case the effects are shown by the curves marked “Unexpected”. However, as the extended repo-rate path can be justified by the fact that it provides better outcomes for inflation and resource utilisation than the main scenario it may perhaps be perceived as being more credible, in which case the effects are shown by the curves marked “Expected”. 4  4  The effects of deviations from the repo-rate path of the main scenario on inflation, output and hours worked are calculated using the Riksbank's model Ramses with the methods described in Laséen and Svensson (2009) for expected deviations and Leeper and Zha (2003) for unexpected deviations. They are discussed in more detail in Svensson (2010c). The lower repo-rate path gives as an expected deviation (unexpected deviation in parenthesis) a largest increase in CPIF inflation of 0.42 (0.22) percentage points, in output of 0.33 (0.21) per cent and in hours worked of 0.35 (0.22) per cent. The extended repo-rate path gives as an expected deviation (unexpected in parenthesis) a largest increase in CPIF inflation of 0.48 (0.25) percentage  BIS Review 60/2010  5  Figure 2.
That the Riksbank should aim to stabilise inflation follows from the Act’s price-stability objective, which the Riksbank has chosen to specify as an inflation target of 2 per cent. That the Riksbank should stabilise resource utilisation follows from the fact that the preparatory work for the Act states that the Riksbank “without prejudice to the price-stability target, should support the goals of general economic policy with a view to maintaining a sustainable level of growth and a high rate of employment”. 3 So what can the Riksbank do in order to achieve sustainable growth and high employment without prejudicing the price stability objective? Well, the best thing the Riksbank can do is to attempt to stabilise resource utilisation around a normal level. But why around a normal level? Surely, a higher level of output and employment than normal would be better? Yes, but it is beyond the power of monetary policy to increase the average level of output and employment and thus increase average resource utilisation. To increase the average level of resource utilisation one would have to use areas of policy other than monetary policy, for example a structural policy designed to improve competitiveness and the workings of the labour market. Unfortunately – as 40 years of experience have shown and 30 years of research have explained – attempts to use monetary policy to keep resource utilisation above the normal level only result in average inflation being higher than the target without raising the average level of resource utilisation.