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Flexible inflation targeting builds a bridge between the long-term objective of monetary policy, which is to keep inflation on target and provide an anchor for inflation expectations, and the more short-term objective of stability in the real economy. Low inflation in recent years is both the result of monetary policy assessments and unforeseen disturbances to the economy. Towards the end of 2002, Norges Bank shifted its monetary stance in an accommodative direction as new information indicated that developments in output and unemployment might be weaker than projected and inflation might be lower than target. The key rate was reduced markedly in 2003 and 2004. The low interest rate level has contributed to a considerable increase in demand for goods and services. Increased petroleum investment and favourable prices in markets for our export products have also made a contribution. So far in this cyclical upturn the mainland economy has expanded by an average of close to 4 per cent. Wage developments reflect and influence the business cycle. Strong employment growth in the 1990s resulted in a rise in labour costs, which in turn had a dampening impact on growth. Moderate wage growth in recent years has been accompanied by a strong cyclical upturn. It appears that wage growth will be somewhat higher in 2006 than in 2005, but not higher than expected. Employment growth was lower over a long period compared with the cyclical upturns in the 1980s and 1990s.