Another observation is that central banks’ inflation forecasts now tend to lie below their respective targets, not just in the short term, but also at the end of the forecast period. This is the case with the Riksbank's and the ECB's forecasts, but also the Federal Reserve’s forecasts are below the target for two years ahead, not reaching target level until 2023 (see Figure 2).1 It appears to be the case that central banks are increasingly making the assessment that they will have difficulty conducting a sufficiently expansionary policy to bring inflation back on target as quickly as usual. * I would like to thank Mikael Apel for helping prepare this speech, Elizabeth Nilsson for translating and Emma  Bylund, Charlotta Edler, Petra Frid, Jens Iversen, Åsa Olli Segendorf, Marianne Sterner, Ulf Söderström and Anders Vredin for valuable comments. 1 The ECB’s target is that inflation should be “below, but close to, 2 per cent”. However, the long-term forecast (5 years ahead) has gradually been revised down and is currently at 1.6 per cent, which is the lowest ever. 1 [15]  However, this is not so strange. It is explained primarily by two interacting factors. One is that the pandemic has resulted in an unusually rapid and large fall in demand. It is hardly surprising that this has the consequence that inflation is falling so far that it may be difficult to get it to rise quickly enough to reach the target level in a couple of years’ time.
In my speech in 2016 I also didn’t address how monetary policy and communication of monetary policy should be formulated more explicitly in a situation where inflation is not expected to reach the target during the forecast period, and there is a risk that the long-term inflation expectations will fall and become entrenched at a low level. We had not come that far then, but as many countries now find themselves in a situation where this risk is a reality, it is a problem that the world's central banks and governments need to deal with. Continued expansionary policy with possible modifications So, if I return to the Riksbank, how do I think we should act more specifically – what should be the plan from now onwards? With regard to communication of  6 [15]  the principal plan, we should, as I mentioned earlier, both be completely clear that monetary policy is still aimed at the inflation target, and also continue emphasising why it is important that the inflation target is some way above zero – with the aid, for instance, of the three questions I mentioned earlier. Explaining why a respectful distance to zero inflation and deflation is so important is not a new element in our communication, but as it is more important than ever before that there is a broad understanding of it in society, we need to increase our efforts. Of course the actual policy should in accordance with this remain expansionary, with the tools that are at our disposal.