Norges Bank operates a flexible inflation targeting regime so that variability in inflation and variability in output and employment are given weight when we set the interest rate. Monetary policy influences the economy with long and variable lags. Norges Bank sets the interest rate with a view to stabilising inflation at the target within a reasonable time horizon, normally 1-3 years. The relevant horizon will depend on disturbances to which the economy is exposed and how they affect the path for inflation and the real economy ahead. We have increased the transparency surrounding the basis for monetary policy decisions in recent years. Norges Bank’s statements following its monetary policy meetings, press conferences, the Inflation Report and speeches provide an account of economic developments that are of importance to the Executive Board’s assessments and interest rate decisions. All publications are available on our website. Underlying each interest rate decision is a monetary policy strategy drawn up by the Executive Board every four months. The strategy is published directly after it has been approved and at the start of the relevant strategy period. Developments in inflation in 2004 and the first months of 2005 Between December 2002 and March 2004, the key rate was reduced by a total of 5.25 percentage points. The interest rate has since remained at 1.75 per cent. The interest rate decline can be ascribed to a number of factors. In late autumn 2002, inflation started to fall. The inflation projections were also revised down.

•  Liberalising access to financial services is not as straightforward as reducing numerical tariff rates on particular categories of merchandise. •  Financial liberalisation involves addressing issues of harmonising regulatory standards, market conduct practices, disclosure requirements, and conditions of licensing. More so than in trade integration, financial integration requires a certain degree of convergence in the development of financial markets in the respective economies. The financial systems across ASEAN are at very different stages of development and sophistication. Unlike the goods market and most services, financial liberalisation and integration must pay close heed to issues of systemic stability. A key lesson from past financial crises is that premature opening up of financial markets without strengthening domestic financial systems and establishing credible safety nets can have painful consequences. While there are good reasons why financial integration has been slower than trade integration, one cannot help but think that progress could have been faster than what we have seen to-date. In that sense, the pace of financial integration is disappointing. ASEAN Finance Ministers and Central Bank Governors are therefore determined to make up for lost time and press ahead with liberalisation in the post-AEC phase leading up to 2020. While the pace of financial integration has not been as fast as we would have liked, it is important that we recognise the progress that has been made and the opportunities that have been created. Let me now touch on the progress and prospects for integration in banking, insurance, and the capital markets respectively.