What is the policy rate forecast?
It takes time before monetary policy has a full impact on inflation and the economy. Monetary policy is therefore guided by forecasts for economic developments. The Riksbank also publishes a forecast for the policy rate.
The policy rate forecast shows what the Executive Board considers to be a well-balanced monetary policy
Monetary policy decisions are normally made eight times a year. On four of these occasions we publish a Monetary Policy Report that contains a forecast for the policy rate. It is an assessment of which development of the policy rate (which interest rate path) is needed for monetary policy to be well balanced, i.e. a monetary policy that keeps inflation low and stable, maintains confidence in the inflation target and at the same time provides a favourable economic development. The policy rate forecast is published in order to explain which direction the Executive Board considers to be well-balanced in the future, given the conditions and economic prospects prevailing at the time of the decision.
Read more: The Riksbank makes forecasts
Current policy rate forecast
The policy rate forecast is made public in conjunction with the publication of the monetary policy decision and the Monetary Policy Report. The current policy rate forecast can be found in the latest Monetary Policy Report.
The policy rate forecast is an assessment – not a promise
It is important to remember that the policy rate forecast is an assessment of the future direction of monetary policy and not a promise that the Riksbank will keep the policy rate on the projected rate path regardless of what happens. Although the Riksbank presents its view on an appropriate forecast for the policy rate at each monetary policy decision, the Riksbank has not committed itself to a certain future monetary policy. Like all other assessments, the policy rate forecast may need to be changed when new information on economic developments in Sweden and abroad is available.
Therefore, there is always some uncertainty about the future development of the policy rate in the same way that there is uncertainty about the future development of the economy. The further ahead the forecast looks, the greater the uncertainty. To illustrate the uncertainty surrounding future monetary policy, the Riksbank often publishes alternative scenarios in its Monetary Policy Report. These are examples of how the interest rate may change if economic developments in the future were to be different from those projected in the main scenario.