Commodity prices fell, but soon rebounded. Norwegian banks were not directly exposed to loss-making financial instruments backed by subprime US housing mortgages. The banks suffered for a short period when international liquidity dried up, but these problems were resolved. In addition, substantial fiscal leeway enabled policy to respond forcefully, allied with a slashing of interest rates, from 5.75 percent in September 2008 to 1.25 percent in June 2009. The economy recovered rather quickly, and we did not need to resort to quantitative easing or interventions in the foreign exchange market. When the oil price plummeted in 2014 and 2015, the value of our currency fell sharply, reflecting weaker terms of trade. Norges Bank reduced the key policy rate. This dampened the decline and facilitated structural adjustments in the Norwegian economy. As the krone depreciation did not result in demands for wage compensation, competitiveness improved. Fiscal policy also responded forcefully. Together, this enabled a reasonably swift return to more normal economic conditions. At the same time, low interest rates contributed to increasing housing prices and debt levels in Norway, as in some other countries. We are ready to normalise monetary policy Over the past couple of years, growth in the Norwegian economy has been solid, underpinned by an economic upturn among our trading partners, increasing oil prices and low interest rates. The labour market has improved. Spare capacity is gradually diminishing, and capacity utilisation now appears to be close to a normal level. Underlying inflation is close to the 2 percent inflation target.

These signs are not unconnected to the swift and resolute intervention by the public authorities, which has proven effective in checking the growing perception of risks on financial markets and in increasing agents' confidence, thereby playing a valuable role in containing this crisis. But it is precisely now when the results of the measures are coming to fruition that it is most important to shun complacency and untimely and excessive optimism, which might curtail the process. The latest forecasts from the IMF and from many other supranational institutions admittedly include upward revisions of world output growth rates in 2010; but they also emphasise the persistence of a high degree of uncertainty. This applies in particular to financial market developments, where certain tension indicators still remain at high levels. BIS Review 124/2009  1  It seems reasonable under these conditions that the most immediate objectives of the economic authorities should continue to focus primarily on restoring the orderly working of financial markets and on maintaining the aggregate demand stimulus policies until economic recovery takes firm root, as was recently reiterated at the Pittsburgh G-20 Summit. Further ahead, however, the main challenge will be to identify the appropriate time for withdrawing the exceptional measures that have been adopted in the financial, fiscal and monetary realms, avoiding both a premature withdrawal that might undermine what has been achieved and an unnecessary prolongation that might ultimately generate dynamics that are difficult to reverse, and that are harmful to growth and well-being.