However, the uncertainty regarding the way the economy will develop leads to uncertainty over the future interest rate, too, which is reflected in the fan around the repo-rate path. My impression is that there is normally very little opportunity to influence market expectations further than six months ahead by publishing a repo-rate path. Goodhart and Rochet also show in their evaluation that it is the Riksbank’s repo-rate path that adjusts to market rates rather than vice versa, except in the short term, when the influence is mutual. But they also point out that the data period is so short that it is not possible to draw any far-reaching conclusions.21 Check against other monetary policy frameworks We should check the repo rate produced in our forecasts and models against other monetary policy frameworks. Personally, I usually check to see whether the repo rate level is reasonable by looking at what the Taylor rule would imply. In the original Taylor rule, the policy rate is determined by inflation and the GDP gap.22 According to this rule, the policy rate shall be set equal to the long-term level of the policy rate plus 1.5 times the deviation in inflation from target plus 0.5 times the deviation in GDP from potential GDP. The Taylor rule has the advantage that it is based solely on information in the current situation and not on forecasts. Measured inflation is used as an indicator of future inflation, which may be reasonable if there is some sluggishness in the inflation process.
Following quarter-on-quarter growth in GDP of 0.9% in the first quarter, the latest information indicates that activity is expected to maintain a strong rate of expansion, whereby a further slight quickening in output is estimated in the second quarter, to 1% in quarterly terms. Average growth in the first half of the year, in annualised terms, is thus expected to be around 4%. The projections for the rest of 2015 and for next year point to continuing dynamism, with Spain clearly outpacing most of its euro area partners. However, this momentum might be slightly contained by the weakening of some of the expansionary impulses, such as the fall in oil prices and the depreciation of the euro. For 2016, the projections estimate average growth of 2.7%, with greater uncertainty naturally accompanying the longer time ahead involved. In terms of the composition of spending, the most recent phase of the recovery has been marked by the growing weight of national demand, which has replaced external demand as the main net contributor to growth. Foreseeably, in the near future, this pattern will continue, with a contribution by the external sector to the increase in GDP that is practically neutral in net terms. Exports, particularly to the euro area, are expected to post higher growth, while the tempo of imports will slacken somewhat.