rate assumptions, following the reserve bank of new zealand, who introduced it in 1997. more recently, the swedish riksbank and the czech national bank have also started to publish interest rate forecasts. woodford, m. ( 2005 ), “ central - bank communication and policy effectiveness, ” paper presented at frb kansas city symposium on “ the greenspan era : lessons for the future, ” jackson hole, wyoming, august 25 - 27, 2005. providing forecasts based on both a constant interest rate and market expectations give information not only about the sign but may also give some guidance about the range. see, for example, the following citation from the bank of england ’ s inflation report of february 2008 : “ under market interest rates, the central projection for inflation was a little above the target in the medium term, while under constant interest rates, it was below the target. ” this suggests that the likely interest rate path lies somewhere between a constant rate and market expectations. publishing endogenous interest rate paths raises a number of issues, and there is disagreement among both academics and central bankers on whether being that precise about future policy intentions is beneficial or not. the key issue in the debate is whether such communication implies guidance or noise. some of the arguments for transparency relate to the beneficial effects when private agents understand the central bank ’ s reaction function, such that market interest rates will adjust more appropriately to economic news. publishing the interest rate forecast may not be sufficient to communicate the central bank ’ s reaction function, as one specific forecast does not in itself convey much information about how the central bank responds to various shocks. one could argue that three ingredients are required ; 1 ) the forecasts, 2 ) how the central bank responds to shocks, and 3 ) the criteria underlying the forecasts and reaction function. the first two ingredients provide efficiency in monetary policy, in the sense that private agents knowing the central bank ’ s assessments and reaction function can respond appropriately to economic developments. the third ingredient contributes to a better understanding of the objectives of monetary policy and the link between objectives and policy. this could underpin the credibility of the reaction pattern, and is also important for democratic accountability. in addition, the reaction function could change over time, for example due to a change in how the economy works or an improvement of the understanding of economic mechanisms. the criteria could then give some guidance to the public on how and why the reaction function might change. let me briefly explain how norges bank communicates the three

##hment of the gold standard in 1931. in more recent times, reserves have primarily consisted of foreign government bonds, first in us dollars under the bretton woods agreement up to 1971 and later also in various european currencies and japanese yen. norges bank was charged with managing the government petroleum fund when the first capital transfers were made to the fund in 1996. this was a natural extension of our responsibility for managing foreign exchange reserves. the aim of the government pension fund global, as it is now called, is to ensure that the income from our oil and gas resources will also accrue to future generations. the principle underlying the fiscal rule is that the real return on the fund can be used over time for consumption or investment. this ensures a gradual phasing - in of petroleum revenue spending, while preserving the wealth. the fund is the nation ’ s family silver. it is no longer held in norges bank ’ s vault, as it was during the period of the silver and gold standards. the fund is invested in fixed - income securities, equities and real estate across the world. when norges bank had finished collecting the silver tax around 1820, the bank ’ s silver holdings came to somewhat more than 50 grams per inhabitant, which is the equivalent of about one silver spoon. the value of the fund has just recently exceeded nok 5 trillion, or about nok 1 million per inhabitant. it is the political authorities – the government and the storting – that define the investment framework for the fund. norges bank is charged with the operational management of the fund and ensuring compliance with the guidelines. within the framework established by the ministry of finance, norges bank shall aim to achieve the highest possible return. the investment management function has to a large extent been delegated from norges bank ’ s executive board to norges bank investment management – or nbim. chart 8 : cumulative value of the government pension fund global ( gpfg ) the fund ’ s results have been favourable. since 1998, the cumulative return on the fund has been close to nok 1 800 billion, which is more than a third of the fund ’ s total value. so far, our nation has earned a solid return on its investments. chart 9 : real return on the gpfg and estimated spending high returns in recent years have contributed to an average annual real return since start - up of close to 4 percent, while the spending of petroleum revenues over the fiscal budget