Ekholm: The role of forecasts in monetary policy
On Tuesday Deputy Governor Karolina Ekholm held a speech on the role of forecasts in monetary policy. Below is a summary of the speech.
”Forecasts play a very central role in the monetary policy conducted in Sweden. As monetary policy affects the economy with a time lag, it must be based on forecasts for inflation and resource utilisation. The Riksbank uses both models and expert assessments in its forecasting work. The models help us to quantify different types of risk scenario. Our aim should be to quantify all of the risks judged to be relevant to the monetary policy decisions, but in reality it is not always possible to do this prior to the monetary policy decisions. In particular this is the case with risks that are difficult to quantify, such as the risk of financial crisis. The more information we receive on the effects that different risk scenarios have on the economy, the clearer the base for the monetary policy decisions will be.
In principle, we Executive Board members have insight and the possibility to discuss the forecasts with the staff throughout the whole of the forecasting process. We can question the assessments made. The entire Executive Board does not always agree with the analyses presented, as these are the results of a compromise where the different opinions are weighed together. But in this case it is made clear, either from the Board member’s contribution to the debate as published in the minutes, or in the form of a reservation entered.”
Read the whole speech in the PDF file below.
