responded to the surge in inflation by raising policy rates further in recent weeks, and policy rate expectations have increased. higher interest rates could lead to slower growth ahead than we projected earlier. chart 3 : unemployment is low domestic activity was higher through the summer months than assumed earlier. household consumption has been higher than expected. at the same, we are seeing signs of a cooling housing market. house prices fell more than we had expected in september, and the number of unsold homes has increased. according to statistics norway's business sentiment survey, the prospects for manufacturing have weakened. the labour market is tight, and the employment ratio is high. the number of employed appears to be slightly higher than expected, while the number of unemployed has been a little lower. the number of job vacancies is high, but the number of new vacancies has decreased slightly. chart 4 : inflation is high inflation has continued to edge higher and is markedly above our target of 2 percent. in the year to september 2022, consumer prices rose by almost 7 percent. energy prices were a main driver, but prices are also rising rapidly for a range of other goods and services, both for domestically produced and imported goods and services. in september inflation was higher than we had expected, with a surprisingly sharp rise in transport prices, which tend to vary widely. the committee judges that a higher policy rate is needed to bring inflation down towards the target. inflation has increased more than projected, and the labour market appears to be a little tighter than previously anticipated. these developments could suggest raising the policy rate by more than 0. 25 percentage point at this meeting. on the other hand, there are signs that some areas of the economy are cooling down, and prospects for lower - than - expected freight and energy prices may curb inflation ahead. the policy rate has been raised markedly over a short period, and monetary policy is beginning to have a tightening effect on the economy. this may suggest a more gradual approach to policy rate setting. the future policy rate path will depend on how the economy evolves. the outlook is more uncertain than normal, but we will most likely raise the policy rate again in december, when we will also present this year's fourth monetary policy report with new forecasts for the norwegian economy. 2 / 3 bis - central bankers'speeches 3 / 3 bis - central bankers'speeches

price stability, and so our strategy required us to respond – even though our central forecast at that time was for a low but positive rate of inflation in the years ahead. we responded in two main ways. first, we clarified our reaction function to the main risks we saw and the instruments we would use if each of those risks materialised. 5 this sent a clear signal to observers that we were ready to respond in the case of adverse contingencies. then, when those contingencies arose, we followed through with our forward guidance and introduced a set of policy measures that was designed to cover the full downside distribution of risks – that is, a very accommodative policy stance to combat disinflationary forces, and an option to be even more accommodative if the situation deteriorated into outright deflation. thanks to these policy interventions, the distribution of risks has narrowed considerably over time – as you can see from the yellow line – and we no longer see a meaningful probability of deflation. the balance of risks has also shifted upwards as the economic recovery has gathered steam. the current economic expansion in the euro area is stronger than it has been for a decade and broader than for two decades. this improving picture is the main reason for our recent decision to recalibrate our policy by reducing the pace of our monthly asset purchases from €60 billion to €30 billion, starting in january. of course, risks emanate not only from our own jurisdiction, the euro area, where we can respond with our monetary policy, but also from the rest of the world. indeed, while the ecb ’ s governing council currently sees the risks surrounding the euro area ’ s growth outlook as broadly balanced, it sees downside risks relating primarily to global factors. but here too we can manage risks effectively by cooperating closely with other central banks. 6 this does not mean that we decide jointly on policy actions. it rather means that through our regular bilateral contacts, and dialogues in multilateral fora such as the imf, the bis and the 2 / 7 bis central bankers'speeches g20, we can achieve a better understanding of global risks and their channels of propagation. and when risks do turn into shocks, this cooperation allows us to build up readiness and have the tools in place to react. perhaps most importantly, since 2011, the ecb has operated a permanent network of swap lines with the bank of england, the bank of japan, the federal reserve and others