developments, according to eurostat ’ s flash estimate, annual hicp inflation was 2. 2 % in march 2006, compared with 2. 3 % in february and 2. 4 % in january. in the short run, inflation rates are likely to remain above 2 %, with the precise levels depending largely on developments in the more volatile components of the index. beyond the short term, changes in administered prices and indirect taxes are expected to significantly affect inflation in 2006 and 2007, and an upward impact may also be expected from the indirect effects of past oil price increases. at the same time, wage dynamics in the euro area have remained moderate over recent quarters and growth in wages is expected to remain contained, partly reflecting strong global competitive pressures, particularly in the manufacturing sector. over the recent past, moderate wage trends have helped to dampen domestic inflationary pressures ; looking ahead, it is crucial that the social partners continue to meet their responsibilities in this regard, also in the context of a more favourable economic environment. risks to the outlook for price developments remain on the upside and include further increases in oil prices, a possibly stronger pass - through of oil price rises into consumer prices than currently anticipated, additional increases in administered prices and indirect taxes, and – more fundamentally – stronger wage and price developments than expected due to second - round effects of past oil price increases. turning to the monetary analysis, the latest developments confirm that the stimulative impact of the low level of interest rates remains the dominant factor behind the high trend rate of monetary expansion. moreover, the annual growth rate of credit to the private sector has continued to increase over recent months, with borrowing by households – especially loans for house purchase – and nonfinancial corporations rising rapidly. overall, strong monetary and credit growth in an environment of ample liquidity in the euro area continues to point to upside risks to price stability over the medium to longer term. to sum up, annual inflation rates are projected to remain elevated in 2006 and 2007, and the economic analysis indicates that the risks to price stability remain on the upside. given the strength of monetary growth and the ample liquidity situation in a context of improving economic activity, crosschecking the outcome of the economic analysis with that of the monetary analysis supports the assessment that upside risks to price stability over the medium to long term prevail. it is essential that medium - term inflation expectations remain firmly anchored at levels consistent with price stability. accordingly, the governing council will continue to monitor very closely all developments

unemployment is low. at the same time, there are signs that the labour market is less tight than earlier. employment growth has declined, and unemployment increased a little through last year. unemployment has evolved as we projected in december, while employment appears to be slightly higher than projected. chart : inflation broadly in line with projections price inflation has declined since last summer but remains markedly above the inflation target. energy prices increased through autumn so that overall consumer price inflation has moved back up somewhat. excluding energy prices and indirect tax changes, inflation moved down to 5. 5 percent in december broadly as projected, with a fall in both imported goods inflation and the rate of increase in domestic goods and services prices. chart : policy rate will likely remain at the current level for some time the committee assesses that the policy rate is now sufficiently high to return inflation to target within a reasonable time horizon. monetary policy is having a tightening effect, and the economy is cooling down. it will take time before we see the full effects of the past rate hikes. at the same time, business costs have risen considerably in recent years. continued high wage growth and the krone depreciation through last year will likely restrain disinflation. we therefore believe a continued tight monetary policy stance will be needed for some time ahead. further out, when inflation comes down and economic conditions so warrant, the committee can start lowering the policy rate. there is uncertainty about future developments in the norwegian economy. if input cost inflation remains elevated or the krone depreciates again, price inflation may remain high longer than projected. in that case, the committee is prepared to raise the policy rate again. if there is a more pronounced slowdown in the norwegian economy or inflation declines more rapidly, the policy rate may be lowered earlier than envisaged in december. 2 / 2 bis - central bankers'speeches