The new  8  BIS central bankers’ speeches  international rules are to be phased in gradually from 2013 to 2019. That is a long time to wait. The authorities must cooperate across national borders on regulations, the timing of their implementation and enforcement. The dividing line between our own and other countries’ banks is becoming increasingly blurred. Our close relationship with our neighbours also applies to the financial sector. Leading the way together with a coordinated introduction of new and stricter rules could be of mutual benefit. The Ministry of Finance has overriding responsibility for financial stability. However, it can be demanding to restrain debt growth in times of strong optimism and confidence in the future. Our experience of well defined mandates and a clear delegation of responsibility in the field of monetary policy has been positive. The legal authority to implement macroprudential measures to safeguard financial stability should be delegated, just as the government has delegated responsibility for interest rate setting. Norges Bank should be assigned formal responsibility to provide concrete advice on macroprudential measures for the financial sector. The Bank has a highly competent staff with a broad background and a daily presence in financial markets. Norges Bank is therefore prepared to provide advice on the measures that should be implemented. Finanstilsynet (Financial Supervisory Authority of Norway) should be responsible for implementation. The central bank and Finanstilsynet are both housed in this building – but communication between the two institutions should take place through public channels.

On the other hand, the consideration of guarding against the risk of future financial imbalances that may disturb activity and inflation somewhat further ahead suggest that the key policy rate should not be kept low for too long. Chart 10: Percentage change in the CPI since the beginning of each decade. 1980s and 2000s Chart 11: Percentage growth in mainland GDP since the beginning of each decade. 1980s and 2000s Drawing some of the threads together from the past decade, it can be said that inflation has been fairly stable and close to the target, which shows that monetary policy has been effective. Compared with the 1980s, for example, inflation has been considerably lower the past decade and growth in the mainland economy has been markedly higher. There has been no conflict between low inflation and high economic growth as many economists previously maintained. 4 The challenges encountered have provided new insight. Inflation is not self-stabilising and there are costs involved in bringing it back to target. The Bank’s analyses and communication have evolved. The Bank has gained insight into how the interest rate functions under an inflation targeting regime. Economic agents have become familiar with our response pattern. In interest rate setting, we do not give weight exclusively to bringing inflation back to target, but also take into account the impact of the interest rate on output and employment. After a decade of learning, inflation targeting has become more flexible. That flexibility is good to have, and easy to lose.