stable output and employment and to counteracting the build - up of financial imbalances. inflation targeting should be forward - looking and flexible. in some situations, a longer horizon than usual is appropriate for returning inflation to the target after a deviation. this may lead to a better overall result. in the wake of the fall in oil prices in 2014, the policy rate was lowered, but we stopped at 0. 5 percent. the objective of financial stability was given weight. the scope for flexibility in inflation targeting depends on how well inflation expectations are anchored at the target. norges bank ’ s experience, based on close to 20 years of inflation targeting, suggests that a small open economy must expect inflation to deviate fairly widely from the target at times, rising above target or falling below. but at the same time, inflation has remained within a range around the target where deviations from the target cannot be said to have entailed material economic costs. this has provided leeway to give weight to other considerations in the bank ’ s monetary policy trade - offs. other countries have come to other conclusions and have chosen to stretch the limits of monetary policy further to bring inflation back to target. if we some time in the future were to experience falling demand and a risk of deflation, we will use the instruments at our disposal to address this situation. our job will be less difficult if fiscal policy also contributes. the primary responsibility of monetary policy, however, is to provide the economy with a nominal anchor, quantified by the inflation target assigned to norges bank. our instruments will always be geared towards this objective. references borio, c. and a. zabai ( 2016 ) “ unconventional monetary policies : a re - appraisal ”. bis working papers 570 dell ’ ariccia, g., p. rabanal and d. sandri ( 2018 ) “ unconventional monetary policies in the euro area, japan, and the united kingdom ”. journal of economic perspectives, 32 eggertsson, g. b., r. e. juelsrud, l. h. summers and e. getz wold ( 2019 ) “ negative nominal interest rates and the bank lending channel ”. norges bank working paper 2019 / 4 filardo, a. and j. nakajima ( 2018 ) “ effectiveness of unconventional monetary policies in a low interest rate environment ”. bis working papers 691 haldane, a. g., m roberts - sklar

that were unleashed last september are affecting the domestic economy. non - bank financing sources notwithstanding the key role played by domestic banks in funding households and firms, especially smaller ones, for the bigger companies there are other equally important credit sources. thus, around 45 % of total corporate borrowing is non - bank, with external debt and domestic bonds at the top of the list. therefore, it is important to understand the behavior of the interest rates on these credits before offering a global outlook of financial conditions. the central bank of chile has no direct effect on external financial conditions. like banks, chilean firms have seen their borrowing conditions tighten under the changed state of affairs. still, our banks and firms continue to enjoy normal access to world financial markets, owing berstein and fuentes ( 2003 ). becerra et al. ( 2009 ). to a great extent to our policy framework that ensures the solvency of our economy and to our sound financial system. as for the local bonds market, january stood out for its large corporate bond issuances. meanwhile, the interest rate demanded from corporate bonds in the secondary market has been falling through all of this year, and is currently approaching its levels of last september. this drop owes exclusively to the decline in the interest rates on central bank documents, because the spread between public and corporate securities has increased significantly since september, reflecting the same global risk factors already mentioned ( figure 5 ). conclusions the global financial crisis has hit hard credit markets around the world. in some unfortunate cases, economies that faced this debacle from a fragile initial position, with high indebtedness or with fast credit growth, have faced drastic adjustments in local asset prices, output, and employment, with dire consequences on their living standards. thanks to the fact that we prepared for years as a country to confront deteriorations of the external environment, our monetary policy has been able to adopt a clear countercyclical stance to lessen the effect on our economy of the global financial meltdown. we have seen that the aggressive reductions in the mpr implemented by the board since january have begun to reflect on the borrowing conditions faced by households and firms. it is reasonable to expect this to continue in the coming weeks, especially after the mpr cut of last week. however, a full normalization of credit demand and supply will depend on the appeasing of the global financial environment, on more clarity about the definitive structure of the global financial system, and on economic growth prospects settling down in