[17] We have a solid tradition whereby the social partners take into consideration firms’ profitability and employment developments in wage negotiations. There may therefore be a reduced need to tighten monetary policy in response to a cost shock than would otherwise have been the case. At the same time, in today’s situation we must guard against a rise in inflation expectations with inflation entrenched at a high level. That would make it more demanding to bring it down. To quote another predecessor, Svein Gjedrem: “Price stability is not self-generating”. Thank you for your attention. References Caballero, R.J. (1991), “On the Sign of the Investment-Uncertainty Relationship”. American Economic Review, 81 (2). Coibion, O. and Y. Gorodnichenko (2015), “Information rigidity and the expectations formation process: A simple framework and new facts”. American Economic Review, 105 (8). Fischer, G. (2013) “Investment choice and inflation uncertainty”. The London School of Economics and Political Science Working Paper 11/2013. Fischer, S. and F. Modigliani (1978). “Towards an Understanding of the Real Effects and Costs of Inflation”. Review of World Economics, 114 (4). Galí, J., J.D. López-Salido and J. Vallés (2007): “Understanding the Effects of Government Spending on Consumption”. Journal of the European Economic Association, 5 (1). Huizanga (1993). “Inflation Uncertainty, Relative Price Uncertainty, and Investment in U. Manufacturing”. Journal of Money, Credit and Banking, 25 (3). Husabø, E. (2017). “Utforming av inflasjonsmålet” [Design of the inflation target]. In Røisland, Ø. (red), “Review of Flexible Inflation Targeting (ReFIT) – final report”. Norges Bank Occasional Paper 51 5/2017.

We have urged French banks, in conjunction with the national institute of statutory auditors, the CNCC, to provide detailed disclosures of their subprime exposures. A joint working group made up of staff from the Commission Bancaire, the Autorité des Marchés Financiers and the French Banking Federation has defined best practices in this area. Institutions have started implementing them in a satisfactory manner and practices should be further improved in the financial statements for first-half 2008. In 2009, the Basel Committee is planning to publish recommendations on information to be disseminated under the requirements of Pillar 3 of Basel II. In-depth discussions with banks led to a convergence of practices for asset valuation, including the priority on relying on prices and directly observable market data. Where banks have had to use valuation models because liquid prices disappeared in some markets, the recommendations deal with consideration of all risks – including liquidity risk and counterparty risk – and the rigorousness of the process for determining such prices. With regard to adapting the Basel II requirements, we are also playing a very active role in the various international working groups led by the Basel Committee to give greater consideration, where necessary, to the capital requirements related to some liquidity lines or to the securitisation rules. Finally, the crisis has highlighted the need for banks to improve their analysis, measurement and management of liquidity risk.