followed a period of slow growth since 1998 and a mild slowdown in 2002 and into 2003. growth in the mainland economy has been high since then, and higher than expected. when the key policy rate was reduced in 2003, demand and output picked up quickly. the upturn was supported by strong productivity growth, reflected in exports, petroleum investment and, after a period, public demand. so far in the cyclical upturn, the mainland economy has grown by an average of just over 4 per cent annually. the upturn is now in a mature phase. even though output increased rapidly, it took a long time for employment to edge up. the increase in employment was for a long period slower than in the upturns in the 1980s and 1990s. employment only began to pick up towards the end of 2005, and has since risen sharply. employment developments were also influenced by substantial labour inflows from central europe following eu enlargement in 2004. strong growth in labour productivity is not due to any substantial increase in the real capital behind each hour worked, but is related to a considerably more efficient utilisation of labour and capital. in addition, growth in labour productivity reflected a marked fall in sickness absence in 2004. the national accounts show more moderate productivity growth in recent quarters. however, since the figures are provisional and can often be revised considerably, we should be cautious about reaching any conclusions. the strong rate of growth has only to a limited extent fed through to a higher rise in prices for consumer goods and services. the rise in prices has none the less accelerated in recent months. in august, the year - on - year rise in the cpi - ate was 1. 8 per cent. underlying inflation has long been projected to be between 1½ and 2 per cent in the second half of this year. the year - on - year rise in the total consumer price index ( cpi ) has been just under ½ per cent in recent months. this is because electricity prices have been substantially lower this year than in 2006, when unusually high electricity prices due to low precipitation levels pushed up the year - on - year rise in the cpi close to the inflation target. in recent months, electricity prices have been at their lowest level since 2002. due to favourable developments in prices for goods produced in norway compared with prices for imported goods, our terms of trade have improved. the impact of the rise in oil and gas prices is particularly strong, but the terms - of - trade gains for the mainland economy have

the accumulation of a debt around six billion dollars with energy companies. law 21667, approved last april, establishes a mechanism for the normalization of prices and the repayment of the debt, considering subsidies for low - income households. as i said, our projections estimate an increase of 1. 45 percentage points in inflation by june 2025 as a result of this regularization of electricity prices. this considers the adjustments to generation, distribution and transmission charges, as well as the assumptions of the macroeconomic scenario such as, for example, regarding variables like the exchange rate and fuels. this effect is certainly an important one. from a monetary policy standpoint, our economy is now better equipped to deal with this shock. on the one hand, we have resolved the imbalances on the expenditure side, and with this, the more persistent inflationary pressures have been controlled. on the other hand, inflation expectations are anchored. this allows us to accommodate this supply shock within the policy horizon, without having to overreact with the rate. our monetary policy framework, being forward - looking, allows us to analyze the impacts of a price increase of this magnitude with several considerations in mind. for example, its origin and persistence. in essence, this increase in electric rates responds to a supply shock and not to an economic imbalance. therefore, we can accommodate this shock with a real interest rate that on average is no different from the one we expected in march and still ensure the convergence of inflation to the target within the two - year horizon. this is so because in the course of the first year of the policy horizon, inflation rises above our march estimate, to accumulate slightly more than one percentage point of higher inflation, while, in the central scenario, the nominal rate sees a softer decline than we expected in march. with this, the convergence of inflation to the 3 % target is achieved in the first half of 2026. however, we will evaluate this process step by step. this is a major shock, which sets in shortly after having gone through a significant inflationary cycle. the projections we present today consider second - round effects and inflationary persistence in line with historical patterns for both consumer and business behavior, as well as for the evolution of the other prices. it is important to point out that the way in which we are facing this shock is quite different from what we would be facing if it were a demand shock. if this had been the case, it would have had lasting impacts and would have