Since inflation targeting was introduced in Norway, inflation has been close to, but on average somewhat below, the target of 2.5 percent. Inflation has consistently remained within a band where the deviations from the target cannot be said to have entailed significant economic costs. Norges Bank Economic perspectives 15 february 2018  As mentioned, the importance of financial markets and financial stability was underestimated before the crisis – also by central banks. The financial crisis revealed how harmful financial imbalances can be. Monetary policy can in given situations take account of the risk of a build-up of financial imbalances. But monetary policy cannot take primary responsibility for heading off a gathering storm. This has been of little concern among the major central banks. Their focus has been on counteracting a deeper and more prolonged downturn and on preventing deflation. In countries that were less affected by the crisis, more attention has been devoted to financial stability considerations. In high-tech, global financial markets, capital moves rapidly between different currencies. At trading desks in the City of London geographical distances vanish. A wide interest rate differential could have a substantial impact on the exchange rate, with repercussions on inflation, output and employment. This is why low interest rates in large economies that were severely hit by the financial crisis quickly led to lower rates in countries where the cyclical situation, in isolation, would have implied higher rates. This was the case in Norway until oil prices fell. Other small open economies have been in the same situation.

I would suggest that unless you were on another planet, no consumer with access to a television, radio or the Internet could have escaped hearing their president, senators and their congressperson telling them the sky was falling. With the leadership of the nation – Republicans and Democrats alike – and every talking head in the media making clear hour after hour, day after day in the run-up to Aug. 2 that a financial disaster was lurking around the corner, it does not take much imagination to envision consumers deciding to forego or delay some discretionary expenditure they had planned. Instead, they might well be inclined to hunker down to weather the perfect storm they were being warned was rapidly approaching. Watching the drama as it unfolded, I could imagine consumers turning to each other in millions of households, saying: “Honey, we need to cancel that trip we were planning and that gizmo or service we wanted to buy. We better save more and spend less.” Small wonder that, following the somewhat encouraging retail activity reported in July, the Michigan survey measure of consumer sentiment released just recently had a distinctly sour tone. Importantly, from a business operator’s perspective, nothing was clarified, except that there will be undefined change in taxes, spending and subsidies and other fiscal incentives or disincentives. The message was simply that some combination of revenue enhancement and spending growth cutbacks will take place. The particulars are left to one’s imagination and the outcome of deliberations among 12 members of the Legislature.