The deposit rate forms the floor for the shortest money market rates. Transparency about intentions, strategies and the implementation of monetary policy makes it easier for economic agents to assess monetary policy. If monetary policy is predictable, an important source of uncertainty is reduced, and – other things equal – the interest rate required to achieve the inflation target will be lower. If economic agents are to have confidence in monetary policy, transparency regarding the central bank’s response pattern is probably a precondition. The interest rate affects inflation through a number of channels. An increase in the interest rate will normally contribute to reducing inflation by curbing demand for goods and services and by strengthening the krone exchange rate against other currencies. An interest rate reduction has the opposite effect. Monetary policy influences the economy with considerable and variable lags. Our analyses indicate that a substantial share of the effects of an interest rate change occurs within two years. Two years is therefore a reasonable time horizon for achieving the inflation target of 2½ per cent. Interest rates are set with a view to achieving an inflation rate of 2½ per cent two years ahead. Norges Bank’s views on the inflation outlook are presented three times a year in the Inflation Report. Our projection for inflation in the period ahead is presented as well as our assessment of the balance of risks surrounding this projection. The Executive Board’s updated assessments are presented in connection with the monetary policy meetings every six weeks.

As a part of implementation plans, SAMA has conducted quantitative impact studies on selected banks, started capacity building within SAMA as well as the banking industry, and formed technical groups comprising of supervisors and bankers to deliberate on technical issues and seek industry feedback to facilitate smooth implementation. Our multi-pronged strategy to implement Basel III is focused on the following areas: i. Setting the regulatory requirements for banks essentially based on the Basel Committee’s rules and international best practices on implementation of Basel III;  ii. Conducting impact studies and collecting data from banks to assess the impact of new capital and liquidity rules on Saudi banks;  iii. Providing guidance to banks on regulatory and technical issues to facilitate the implementation;  iv. Reviewing the plans of banks for implementation and holding bilateral and industrywide meetings at various levels to track progress on implementation;  v.  Arranging and/or coordinating training programs and other capacity building initiatives for supervisors as well as bankers to enhance their understanding of technical issues. We are also actively participating in various international meetings, conferences and forums to keep ourselves updated on international developments;  vi. Implementation of various other standards of BCBS and FSB, besides Basel III. These includes, inter alia, the FSB Principles and Standards on Compensation, BCBS Principles on Stress testing, plans to introduce rules for D-SIFIs, etc. In many areas, the new rules are equally applicable to the branches of foreign banks operating in Saudi Arabia;  vii.