The path to a monetary policy decision

A structured but flexible process

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A structured but flexible process

Producing materials for a monetary policy decision

Published: 7 April 2022

As it takes a long time before monetary policy has a full impact on inflation and the economy in general, forecasts of economic development play an important role in decision making. For the Executive Board to be able to make monetary policy decisions, it needs an assessment of the current economic situation, but also materials on the economic outlook and inflation prospects going forward, and how these are affected by monetary policy. [12] Hallsten and Tägström (2009) describe how the decision-making process functioned 13 years ago. The task of monetary policy, and therefore several elements in the drafting process, remain essentially the same. Materials for the Executive Board to be able to discuss risks and uncertainty and various monetary policy options is also of central importance. In the main, the Monetary Policy Department (APP) is responsible for preparing and producing the materials on which the monetary policy decision is based, but with important participation also from the Markets Department (AFM) and the Financial Stability Department (AFS). Normally, the entire process lasts about five weeks and can be roughly divided into four phases (see Figure 1). The phase before the Monetary Policy Department (APP) presents materials to the Executive Board, the actual meetings with the Executive Board in the Monetary Policy Group (PBG), the phase after these meetings, and finally the monetary policy decision-making meeting and communication in connection with it.

Figure 1. Schematic diagram of the monetary policy process

Schematic diagram of the monetary policy process