We have systematised our judgement so that it is possible for others to determine whether the bank’s assessments seem reasonable. The assessment of risk is linked to six factors that are important for 4 price inflation. Our assessment of risk associated with each of these factors is formulated as a probability distribution around the projection for the variable in question. The assessment of risk associated with the actual inflation projection emerges as a weighted average of these six distributions. The weighting of each factor reflects its significance to developments in price inflation as this emerges in our model. Weighting is heaviest and approximately the same for domestic private demand, wage growth, growth in public expenditure and developments in the global economy. The weighting for exchange rate and oil price is somewhat lower. The chart shows our assessment of the balance of risks associated with estimated wage growth as it was presented in the Inflation Report 3/2001. We estimated 5 per cent wage growth in 2003. At the same time, we said that the probability that wage growth would be higher than projected was greater than the probability that it would be lower. We could present similar charts for the other five factors. The ”fan” for the inflation projection is a topographical map of the overall assessment of the balance of risk. 4  The risk model is discussed further in “Box: Assessment of risk to the inflation projection”, Inflation Report 2/2001, Norges Bank.
Switzerland’s only major drawback is the fact that it is a lightweight in the geopolitical arena, which makes it almost impossible for it to defend itself against protectionist tendencies and discriminatory measures taken by big countries. The Swiss government must therefore take a strong stand on behalf of free trade, while also ensuring that the private sector operates within the best possible framework for its further development. Ultimately, our future welfare depends on the vitality of the private sector, not on any state intervention. BIS Review 166/2009  1