ida wolden bache : higher policy rate to bring inflation down to target introductory statement by ms ida wolden bache, governor of norges bank ( central bank of norway ), at the press conference following norway's announcement of the policy rate, oslo, 23 march 2023. * * * accompanying charts to the speech chart 1 : policy rate raised from 2. 75 to 3 percent norges bank's monetary policy and financial stability committee has decided to raise the policy rate by 0. 25 percentage point to 3 percent. norges bank's task is to keep inflation low and stable. the operational target is inflation of close to 2 percent over time. we are also mandated to keep employment as high as possible and to promote economic stability. chart 2 : inflation markedly above target inflation has moderated a little recently but is still too high. in february this year, consumer prices were 6. 3 percent higher than one year earlier, which is markedly higher than the inflation target. prices for many goods and services have risen more than normal. in recent months, energy prices have shown a pronounced fall. as a result, inflation has been slightly lower than expected. we have raised the policy rate substantially over the past year, and the effects of the past rate hikes are not yet fully evident. growth in the norwegian economy is slowing, but activity is still high and the labour market is tight. at the same time, wage growth is on the rise, and the krone exchange rate has depreciated considerably. these developments will push up inflation and imply that the policy rate must be set higher than we envisaged earlier for inflation to return to target. price stability is essential for a well - functioning economy. high inflation is weakening household purchasing power, and lower - income households with the smallest margins are being hit hardest. borrowers are facing higher interest rates on top of high inflation, and many will be coping with tighter budgets. but by raising the policy rate, we are helping to bring down inflation, which is in everyone's interest. chart 3 turbulence in international banking markets in recent weeks, problems at certain us and swiss banks have led to large movements in global financial markets. equity markets have fallen, and risk premiums in money and bond markets have increased a little. expectations for both norwegian and international policy rates have declined markedly. 1 / 3 bis - central bankers'speeches we are not seeing any signs of liquidity problems for norwegian banks. norwegian banks are profitable,

in the december staff projections, fiscal interventions were assessed to lower the inflation rate in 2022 and 2023 but then to raise the inflation rate in 2024 and 2025 in line with the scheduled expiry of these measures. 12. for further discussion of the differential dynamics of goods inflation and services inflation, see lane, p. r. ( 2022 ), “ inflation diagnostics ”, ecb blog, 25 november 2022. 13. see for a more detailed discussion rostagno, m., altavilla, c., carboni, c., lemke, w., motto, r., saint guilhem, a. and j. yiangou ( 2019 ), monetary policy in times of crisis, oxford university press, 2021. 14. see : ecb ( 2016 ), " the relationship between hicp inflation and hicp inflation excluding energy and food ”, ecb economic bulletin box 7, issue 2 / 2016 as well as workstream inflation measurement ( 2021 ) : " inflation measurement and its assessment in the ecb ’ s monetary policy strategy review " ecb occasional paper, no. 265, september and ehrmann, m., ferrucci, g., lenza, m. and d. o ’ brien ( 2018 ), measures of underlying inflation for the euro area, ecb economic bulletin issue 4, 2018. 15. for a more detailed discussion see lane, p. r. ( 2022 ), " bottlenecks and monetary policy " ecb blog, 10 february. 16. the analysis of pipeline pressures for the food category also suggests a considerable easing in food inflation over the course of this year. the methodology of the ippi is laid out in koester, g., rubene, i., goncalves, e. and j. nordeman ( 2021 ), " recent developments in pipeline pressures for non - energy industrial goods inflation in the euro area, " economic bulletin box, european central bank, vol. 5. 17. see goncalves, e. and koester, g. ( 2022 ), “ the role of demand and supply in underlying inflation – decomposing hicpx inflation into components ”, ecb economic bulletin issue 7, 2022. the underlying technique was developed by shapiro, a. h. ( 2022 ), “ how much do supply and demand drive inflation? ”, frbsf economic letter, no 202