Knowledge of the size of this uncertainty can in itself be relevant for those who wish to form an idea of how the repo rate will develop in future. There are various methods that can be used to form an idea of how great the probability is of the repo rate being within a particular interval at a particular time in the future. We made an analysis in a box in the last Inflation Report as to how this kind of uncertainty interval can be calculated and presented two different methods 4 . In the first method, the implied forward rates are calculated for various points back in time. A study is then made of how well the implied forward rates have anticipated the actual development of the repo rate. Based on the “forecasting errors” it is possible to calculate the uncertainty interval around the forecast given by the implied forward rate path. The method is thus retrospective. Unsurprisingly, the calculations show that the spread of the deviations (the standard deviation) increases with the length of the forecast horizon (see Figure 4). This illustrates the uncertainty about macroeconomic developments in general and that the probability for unexpected disturbances arising in the economy increases with the length of the forecast horizon. 2  See also the Separate Minutes of the Executive Board, No. 4, 2006. 3  See also Nyberg, L., “House price developments and monetary policy”, speech at Evli Bank, 19 December 2005.
Let me take the opportunity here to touch on a question that sometimes arises when we comment on market expectations of the development of the repo rate in connection with a monetary policy decision: What expectations do we normally relate to when making our interest rate decision? The expectations reflected by the implied forward rate path on which the forecasts in the Inflation Report are based, or the expectations applying at our monetary policy meetings? It is unavoidable that some time passes from finishing the forecasting work to the publication of the Inflation Report. New information can become available during these days that affects the implied forward rate path. At the monetary policy meeting, the Executive Board always makes an assessment of whether the new available information since the forecasts were made gives rise to any change in the analyses and forecasts. If this is the case, it is explained in connection with the presentation of the report and the announcement of the monetary policy decision. However, the path of implied forward rates changes from day to day and over time as new information is received and new assessments are made. There is no reason for the Riksbank to comment on every small shift of the implied forward rate path in hundredths or tenths. The precision of the inflation forecasts is hardly so great that it is worthwhile attempting to distinguish the consequences of minor shifts in the interest rate path for our forecasts.