Good experiences of the repo-rate path
News Just in time for the ten-year anniversary of the Riksbank’s first published repo-rate forecasts, the so-called ‘repo-rate path’, the Riksbank has evaluated the experiences of the forecasts. Even if there have been constant challenges, the conclusion is that the repo-rate path has benefited the Riksbank’s monetary policy work, both its internal analysis work and its external communication.
"We think that our repo-rate forecasts have worked well; they help us in our work to design monetary policy and facilitate communication of our decisions. At the same time, the forecast work has been challenging with the financial crisis and falling global rates, which have made it more difficult for both the Riksbank and other central banks to make accurate forecasts," says Kerstin af Jochnick, First Deputy Governor of the Riksbank.
Experiences of producing and publishing repo-rate forecasts can be evaluated along two dimensions. The internal dimension deals with the Riksbank's work of using forecasts of the development of the economy to arrive at an appropriate monetary policy, while the external dimension deals with the communication of monetary policy. These dimensions are also largely connected.
Experiences from both dimensions have been good. The Riksbank's internal work on the material for monetary policy decision-making has developed and improved. The possibilities for an open external discussion and evaluation of monetary policy have also improved due to the Riksbank's publication of its own forecasts for the repo rate.
But there have also been challenges. One such challenge is that the repo-rate forecasts have not been particularly accurate. Another challenge lies in the differences between market rates and the Riksbank's repo-rate forecasts.
A Riksbank Study explains why the Riksbank started publishing repo-rate forecasts and discusses, on an overall level, what its experiences of this have been. As a complement, more detailed descriptions of various sub-areas have been published in the form of three Staff Memos and a Working Paper.