Moreover, the fact that the considerations are reported openly may help increase confidence in the assessments and conclusions. Consistency in monetary policy actions also increases confidence in the price stability target, which in turn should have a stabilising effect on inflation expectations. The role of predictability in monetary policy It is important the Riksbank is clear and explains the bases on which the interest rate decisions are made. As the effect of monetary policy on price developments has a time lag, the interest rate is changed on the basis of forecasts of future price developments. However, it is not always easy to interpret correctly what is happening in the economy. In recent years it has been difficult to find a clear relationship between the demand situation and inflation in Sweden. GDP growth was high from 1997 to the middle of 2000. Since then the growth in demand has been subdued. During 1997 and 1998 inflation fell, but the rate of price increase has tended to accelerate thereafter. At the same time, inflation expectations have remained at a relatively stable level. There are many explanations for this development and the Riksbank’s view has been described, for instance, in various Inflation Reports. Let me here expound some personal reflections on this issue. If the Riksbank’s monetary policy inspires confidence, inflation expectations will be established around the inflation target. This means that resource utilisation in the economy could vary slightly more, without having an immediate impact on inflation.
Eva Srejber: Monetary policy and inflation expectations in Sweden Speech by Ms Eva Srejber, Second Deputy Governor of Sveriges Riksbank, to Föreningssparbanken in Karlstad, 25 February 2002. *  *  *  I should like to begin by thanking you for the invitation to come here. Today I intend to talk about what guides the Executive Board when we make decisions on monetary policy and what role predictability in the central bank’s actions plays for maintaining price stability. Then I shall take a brief look back at the economic situation immediately following the tragic events of 11 September and summarise the economic situation today. Finally, I should like to explain my views on monetary policy and why I entered a reservation against the decision to leave the repo rate unchanged at the last Executive Board monetary policy meeting. Monetary policy strategy I shall begin with a reminder of what guides us when we make decisions on monetary policy; i.e. how monetary policy strategy has been formulated. The Riksbank has been assigned by law the task of maintaining price stability. We also have the task of promoting a safe and efficient payment system. The banks play a central role in both of these tasks. The monetary policy objective has been defined by the Riksbank as a target for CPI inflation of 2 per cent with a tolerated deviation interval of +/- 1 percentage point. The steering interest rate is the instrument at the Riksbank’s disposal for maintaining price stability.