Economic commentary: Forecasts and monetary policy
“Why do the Riksbank’s inflation forecasts always go to 2 per cent?”, “Why aren't the forecasts more accurate?” and “Why does the Riksbank use models instead of basing forecasts on reality?”
The Riksbank's forecasts are discussed regularly by various actors in society, which is natural and good. In this Economic Commentary, two employees at the Riksbank's Monetary Policy Department explain how forecasts for inflation and the repo rate are made by their department together with the Executive Board members.
The authors wish to give some perspective to the Riksbank's forecasts in relation to those made by others . This is because the Riksbank's forecasts differ in an important way from those of other analysts; namely they must be based on an assessment of which monetary policy is required to bring inflation back on target at an appropriate pace.
"Other forecasters do not need to do this and they rarely do so. But it would be good if other analysts were to analyse and discuss what monetary policy is required to attain the objectives delegated to the Riksbank," write Christina Nyman and Ulf Söderström in their commentary.
By Christina Nyman and Ulf Söderström.
The authors are Deputy Heads of the Monetary Policy Department.