but the cost of not doing so could prove greater. 2 / 4 bis - central bankers'speeches in deciding the policy rate, my colleagues and i are concerned with balancing the risk of tightening too much and the risk of tightening too little. if we had raised the policy rate faster, we could have brought inflation down towards the target faster. but we also give weight to promoting the goal of maximum employment when we set the policy rate. we do not want to raise the policy rate more than required to tackle inflation. but if we do not tighten monetary policy sufficiently, there is a risk that prices will continue to rise rapidly and that households and businesses start planning for high inflation in their price and wage setting. if the policy rate is raised considerably less in norway than in other countries, the krone may depreciate markedly. and if inflation becomes entrenched, it may become necessary to tighten policy even more sharply, with the risk of a severe downturn that could leave many people without a job. that is something we want to avoid. the wage formation model in norway reduces the risk of wage price spirals. that means the policy rate can be raised to a lesser extent than would otherwise have been needed. but inflation will not come down to the target on its own. chart : developments broadly in line with projections let me say a bit more about the assessments we made at our monetary policy meeting this week. we did not prepare new forecasts for that monetary policy meeting, but we did assess new economic information against our june projections. economic growth among our trading partners slowed through spring. while overall inflation receded in many countries, underlying inflation has remained elevated. central banks have continued to raise policy rates through summer. energy prices have fallen in norway. excluding energy prices, inflation has remained high. unemployment has remained low. it is our assessment that overall developments have been broadly in line with expectations. this is why we are also sticking to the plan we set out in june, which was to raise the policy rate to 4 percent now. we know that many people are now wondering whether the current monetary policy tightening cycle is nearing the end. chart : policy rate will likely be raised again in september the answer is that we have come a long way, but we believe that a somewhat higher policy rate will be needed to bring down inflation towards the target within a reasonable horizon. the future policy rate path will depend on economic developments. if the economy evolves as currently anticipated, the policy rate will be

the bank will give notification of this. closing remarks interest rates are now low both globally and in norway. this applies to both nominal interest rates and real interest rates. interest rates differ from what we were accustomed to earlier, and real interest rates are lower than the interval normally arrived at as a result of analytical attempts to estimate the theoretical equilibrium interest rate. low real interest rates in many countries are largely the result of a conscious policy to counteract the international downturn of the past few years. low real interest rates will in the short term stimulate economic growth and contribute to preventing deflation. keeping interest rates low for a long period may involve risk, however. bubbles may develop in markets for both financial and real capital. lowinflation bubbles are a challenge to monetary policy. one would normally expect monetary policy to be gradually tightened as economic growth and inflation returned to more normal levels and that actual interest rates would again correspond more closely with the more theoretical equilibrium interest rate. there is little reason to expect otherwise in the current business cycle, although one might of course raise the question of whether the equilibrium interest rate is still in the range we have believed it to be. in some countries, it could be argued that, in the us for example, the equilibrium interest rate should be higher in the light of strong productivity growth and continued relatively strong population growth. in much of europe, however, populations are more likely to decline and productivity growth is, if anything, weaker than previously, indicating that the equilibrium interest rate should be lower. furthermore, since we are referring to a global equilibrium interest rate, shouldn ’ t developments in china and other emerging markets also play a role? they probably do, but given the distribution of financial and real capital in the world, it is likely that the global equilibrium interest rate is to a large extent affected by developments in the us, the eu and japan. however, viewed from the perspective of a very small, though very open, economy such as ours, it is clear that equilibrium interest rates and required returns do not reflect specific norwegian conditions, but are determined externally, and we must adapt to this situation as well as possible.