13 The index correlates well with our forecast for the change in the key policy rate over the coming year, derived from each vintage of our interest rate forecast. The chart is consistent with households being well informed about the interest rate changes predicted by Norges Bank. Concluding remarks Let me summarise: Norges Bank has provided forward guidance through publishing conditional forecasts for the key policy rate for almost a decade. Our overall experience is positive. We have indications that our reaction pattern is well understood, that agents understand the conditionality of our forecast and that they do pay attention to our predictions of future rates. Over time, however, we should be measured on whether we meet our overriding objective, price stability. A credible interest rate forecast shedding light on the reaction pattern of the central bank provides a clear commitment to price stability and contributes to anchoring expectations. 13  When the index is above 50, the share of households that expect bank rates a year ahead to be higher than today is larger than the share that expect it to be lower. BIS central bankers’ speeches  7  How forward guidance is best provided will depend on economic and institutional factors. A decade of forward guidance in Norway indicates, however, that regularly publishing our own interest rate forecasts is a robust strategy. However, there are unsolved issues. After the international financial crisis, robustness and the interaction between monetary policy and financial stability have become more pressing concerns for monetary policymakers.

A large part of the petroleum production is exported and the bulk of the revenues saved in a sovereign wealth fund. 6 A strong fiscal position, along with a well anchored inflation targeting regime, allowed us to use both fiscal and monetary policy actively during the recent international financial crisis. The unemployment rate has stayed around and below four percent during recent years, and the inflation rate has been low and stable. This picture seems rosy, but there are concerns: property prices have risen sharply over the last 20 years and households are heavily indebted. Norges Bank was given a formal inflation target for its monetary policy in March 2001. The operational target of monetary policy is annual consumer price inflation of close to 2.5 percent over time. Monetary policy shall also contribute to stabilising output and employment. In this respect, the inflation targeting regime is flexible. Norges Bank’s Executive Board comprises seven members, including the Governor, Deputy Governor and five external members. The Board decides collectively on the key policy rate, normally six times a year. 7 Our Monetary Policy Report with financial stability assessment is published on a quarterly basis. Analyses and discussions on interest rate decisions are reflected in the Report. Together with press conferences after our monetary policy meetings, the Report is the main channel for our communication of monetary policy. Since 2013, the Report also includes an evaluation of financial stability conditions, which is also used as a background for Norges Bank’s recommendation on a countercyclical capital buffer for banks.