The Executive Board’s perceptions regarding the economy and thus monetary policy are then woven in with the other information in the Monetary Policy Reports, including alternative scenarios and updates that provide background material for the monetary policy meetings. The forecasts and the monetary policy decisions The Executive Board’s priorities and perceptions The members of the Executive Board may have different perceptions regarding many different factors, which affect the monetary policy they consider to be the most well-balanced. We can have different opinions regarding the economic situation, about the impact of our interest rate policy on the economy, and about how much importance should be attached to stabilising the real economy if this involves a greater deviation from the inflation target. We may also have differing opinions on how risks not directly captured in the forecasts should be included in our deliberations. However, there is no scope for presenting six different repo rate decisions and six different repo rate paths which exactly represent the six Executive Board members’ opinions. In this case the decision-making situation would be very difficult. It would probably also entail the chairman’s repo rate path most often being the one voted through. The chairman decides on how the different proposals should be set against one another in turn and thus has the opportunity to eliminate the alternatives in an order that increases the likelihood of his own repo rate path being in the final battle. Moreover, he has the casting vote.
Models and assessments complement one another Let me briefly describe the forecasting process at the Riksbank. 4 The Riksbank uses both models and expert assessments in its forecasting work. The picture of the forecasting process that I had before I came to the Riksbank was one where data are fed into complex models which then spit out forecasts. This is of course incorrect. The Riksbank works hard to spread the impressions we gain at the many international meetings we regularly attend. We also carry out our own company interviews to try to capture development tendencies before they become visible in the statistics. Models are necessary to put together the whole picture of the analysis and are often used to simulate what various risk scenarios might entail for inflation and monetary policy. But they do have their limitations and the analysis must also take into account information beyond what the models can handle. One model that is known outside of the Riksbank is Ramses, which is a variant of the dynamic stochastic general equilibrium models that have become popular in the central bank world. 5 Ramses is an internally consistent model of how the economy as a whole fits  3  By risk I mean here the weighing together of the probability that something will occur and the consequences of its occurrence. 4  For a more detailed description of the forecasting process, see the speech entitled “The monetary policy decision-making process” by Irma Rosenberg, June 2008.