The reasons for this could be a combination of unclear communication on our part and a willingness among some market agents to read too much into what was actually said. The more our new policy of not signalling between monetary policy meetings becomes established, the better the communication will work. We Executive Board members will of course assess new information continuously and have instantaneous opinions on where we are heading. All those who make forecasts know that one’s opinion of how the future will look like varies over time. But one day one must put one's foot down. It is mainly the result of this sometimes convoluted process that is the interesting factor, although the journey also has some information value. For us Executive Board members each monetary policy meeting is the final point of one such process and it is not until then that we make our collective assessment. Thank you! BIS Review 111/2007  5  Figure 1. Labour market had tightened Per cent of labour force  12  12 Open unemployment Total unemployment  10  10  8  8  6  6  4  4  2  2  0  0 00  01  02  03  04  05  06  07  08  09  10  Sources: Statistics Sweden and the Riksbank  Note. The broken line refers to the Riksbank’s forecast in MPR 2007:2. Figure 2.
The combination of the Riksbank now publishing its own interest rate forecast and at the same time continuing to report how we think has the potential to change the discussion outside of the Bank. It could to a greater extent concern how new information should affect  2  BIS Review 111/2007  expectations of interest rate developments rather than exactly what formulations are used in for example speeches and press releases. Interest rates are by definition always uncertain Let me take up some issues that are important to keep in mind when formulating forecasts for the repo rate. Firstly, the interest rate path we present is a forecast and forecasts are, as we know, very uncertain. To illustrate this, the Riksbank publishes uncertainty intervals, known as fan charts, around its interest rate forecasts and also its inflation and GDP forecasts (Figure 8). As you see, the uncertainty interval increases considerably in relation to the length of the time horizon. Put simply, the probability of unexpected shocks arising in the economy that would lead to developments deviating from the forecasts increases when the time horizon is longer. In other words, it is not easy to make accurate forecasts of the development of the interest rate in the longer term. One means of illustrating this is to see how the implied forward rates have changed over time. Figure 9 shows implied forward rates measured on a quarterly rate. Expectations of the development of the repo rate have varied substantially over time when measured in this way.