in periods. there is no reason to believe that norges bank will not also have to reassess its interest rate forecasts as new information emerges about economic developments. the current economic situation allow me to move on from a more general presentation of monetary policy to a closer look at the current economic situation and monetary policy assessments. since the marked deceleration of consumer price inflation as from 2003, monetary policy in norway has been oriented towards bringing inflation up towards the target of 2. 5 per cent. the low interest rate level has contributed to substantial growth in demand for goods and services. petroleum investment, svensson, l. e. o. ( 2005 ) : “ further developments of inflation targeting ”. memo to sveriges riksbank ’ s conference : “ inflation targeting : implementation, communication and effectiveness ” 10 – 12. june 2005. favourable prices in important export markets and a strong upturn in the world economy have also contributed to solid growth in the norwegian economy. so far in the cyclical upturn, the mainland economy has grown by an average of close to 4 per cent annually. although the underlying rise in consumer prices has picked up from its trough two years ago, it remains moderate and well below the inflation target, even three years into this cyclical upturn. the global economy is now in the strongest upturn since the early 1970s. developments are particularly favourable in asia, and the situation in a number of countries in europe appears to be improving. growth in the us has been high for a long period, but has declined somewhat so far this year. there are prospects that a weaker us housing market may lead to increased household saving and lower consumer demand. the effect of these developments on the global economy will depend on the scale and timing of the correction. international equity markets have stabilised following a turbulent period in may and have edged up through the summer. norges bank ’ s assessment is that global growth will abate somewhat from 2006 to 2007, but will remain solid. however, many observers have pointed out that the risk of weaker developments may have increased somewhat recently. interest rates remain low among several of our trading partners, even though they have been raised so far this year in a number of countries as a result of rising energy prices and higher consumer price inflation. in the us, there are now expectations that the interest rate has peaked, and that it will be lowered in the course of summer 2007. a rise in key rates is expected over the next year in the euro

associated with monetary policy and more effectively anchor longterm inflation expectations. in his view, however, the introduction of a long - term inflation target is fully consistent with current us monetary policy 1. there has been little interest in us political circles in changing the monetary policy framework 2. pursuant to the regulation of march 2001, the mandate for monetary policy stipulates that monetary policy shall be aimed at stability in the norwegian krone ’ s national and international value, and at the same time underpin fiscal policy by contributing to stable developments in output and employment. the operational objective of monetary policy is low and stable inflation, with annual consumer price inflation of approximately 2. 5 % over time. the mandate implies that inflation targeting shall be flexible, so that weight is given to both variability in inflation and variability in output and employment. the concrete target for inflation varies somewhat among central banks. the inflation target may be formulated as an interval, for example 1 - 3 per cent, as in new zealand or, as in norway, as inflation of close to 2. 5 per cent over time. partly owing to various disturbances to the economy, inflation cannot be expected to remain at target constantly. central banks have somewhat varying formulations as to how rapidly inflation should be brought back to the target. some central banks state that inflation should be brought back to target within a “ reasonable time horizon ” or “ over the medium term ”. others have quantified that the inflation target should normally be attained within two years, as in sweden, or as in norway, where the interest rate is set with a view to stabilising inflation at the target within a reasonable time horizon, normally 1 – 3 years. in practice, the monetary policy conducted by most central banks is nonetheless similar. they orient monetary policy towards maintaining low and stable inflation. all central banks will reduce their policy rate when there are prospects of low inflation in the medium to long run and raise it when there are prospects of high inflation. what distinguishes norges bank from other central banks? monetary policy in norway is in line with the monetary policy conducted by a number of central banks in the oecd area. one difference, however, is that norges bank is conducting monetary policy in an oil economy. as a result of the high level of earnings and fluctuations in these petroleum revenues, the most important contribution fiscal policy can make to stabilising the norwegian economy is to provide a sound, longterm strategy for the use of petroleum revenues. in other words