towards summer, we therefore raised the policy rate further and adjusted up the policy rate forecast. chart : we are not seeking to bring down inflation as fast as possible norges bank is tasked with keeping inflation low and stable, while helping to keep employment as high as possible. low inflation and high employment are not conflicting objectives in the long term. low and stable inflation over time is a precondition for a well - functioning economy, and in the long run it is not possible to achieve higher employment by accepting higher inflation. but in the short run, when setting the policy rate, there may be a conflict between the two objectives. higher interest rates contribute to reducing inflation, but rate increases also contribute to dampening economic activity and can lead to higher unemployment. we are not attempting to bring down inflation as 2 / 5 bis - central bankers'speeches fast as possible. we have consistently emphasised the aim of avoiding a sharp rise in unemployment. the strong weight we give to employment is reflected in our forecasts where it takes a long time for inflation to come down to the target. we know that the interest rate increases have a cost and that they can have uneven effects on different groups. since we started raising the policy rate after the pandemic, interest rates on housing loans have roughly tripled. on top of higher interest rates, borrowers have faced steadily rising prices for most goods and services. many people might feel that we have made the burden even heavier. when we have raised the policy rate, it is because the cost of not doing so would have been greater. high and variable inflation entails substantial costs and adversely affects low - income groups in particular. norges bank must react when there are prospects of high inflation, independently of the source of the rise. if firms and the social partners become accustomed to high inflation, and it becomes embedded in their price and wage setting behaviour, inflation may become entrenched. if the fx market loses confidence in inflation returning to target, the krone exchange rate could depreciate substantially. more forceful tightening may then be needed later, with the risk of a severe downturn with an increase in job losses. by maintaining confidence in low and stable inflation over time, we are better equipped to deal with new shocks and periods of turbulence in the future. since last autumn, inflation has slowed, to a large extent due to the reversal of the conditions that triggered the rise in prices in the first place. international trade in goods is flowing close to

prudential policies, and the institutional focus of those policies has worked well in practice. the conservative and through - the - cycle approach to capital adequacy, including basel 2 implementation, is an example of how our micro - prudential stance has enabled our financial system to flourish and to be resilient through the recent crisis. we believe this approach and our micro settings are effective in doing the job almost all of the time. however, by its nature, micro - prudential supervision has not always paid sufficient regard to macro - financial interactions. the aim now is to design prudential policies with macro - effects firmly in mind. the challenge for researchers is to identify policy instruments that can actually be used in a real - world setting. this involves careful analysis of what individual tools might or might not be able to achieve, the channels through which they would be expected to work, and the potential costs associated with using them. the case for these new instruments rests mainly on their scope to build greater financial system resilience to the risks associated with the extremes of the credit cycle. in addition, some tools may have the ability to directly dampen the credit cycle. some tools are potentially more effective in achieving the first of these objectives than the second. while a range of instruments is being viewed enthusiastically by some commentators, we must be careful about unintended consequences. the case for any particular instrument needs to be informed by a full analysis of its likely effectiveness in a real - world setting, along with the associated costs of deploying it. it is important here to be clear whether tools would be aimed at building resilience and / or dampening excessive credit growth. bis central bankers ’ speeches we also need to think about policies that address the cross - sectional dimension as well as the time dimension. in other words, the risk exposures and interconnections between institutions at any point in time ( the “ cross - section ” dimension ), as well as the tendency for financial institutions, households and businesses to become over - exposed during an upswing, and excessively cautious in the subsequent downturn ( the “ time dimension ” ). there are also numerous design issues. would the instruments be set by rules or discretion? would they be set once and left alone or varied over the course of the economic cycle? or would they be deployed only in exceptional circumstances? what governance arrangements are needed? we need to be very conscious of the costs of using macro - prudential