svein gjedrem : monetary policy in norway speech by mr svein gjedrem, governor of norges bank ( central bank of norway ), given at norges bank ’ s conference on monetary policy 2006 : evaluating monetary policy, oslo, 30 march 2006. the speech is based on inflation report 1 / 06 and previous speeches. the charts in pdf - format can be found on the norges bank ’ s website. * * * 1. introduction the title of this conference is “ evaluating monetary policy ”. the conference therefore gives me an opportunity to provide a background for the assessment of monetary policy in norway. 2. transparency and communication of monetary policy strategy in most industrial countries, monetary policy is oriented towards low and stable inflation. low and stable inflation is the most important contribution monetary policy can make to sound economic developments. as a framework for organising and explaining monetary policy, inflation targeting is now common. in our country, inflation targeting was introduced in march 2001. as non - elected bodies, central banks are granted substantial autonomy in the execution of monetary policy. here, as in many other countries, the political authorities have delegated monetary policy decision - making to the central bank. this means that it has instrument independence, that is, the bank ’ s executive board sets the short - term interest rate. the bank is also accountable to the political authorities. to be able to evaluate our policy – not only the political authorities – but also financial markets and the general public need to know how we interpret our mandate, our view on how the economy works and trade - offs. therefore, monetary policy must be transparent. transparency and communication are also important for monetary policy effectiveness. monetary policy works mainly through expectations and is only effective if the central bank is able to influence interest rate expectations. professor michael woodford has expressed this very clearly in stating that monetary policy is “ management of expectations ”. “ for not only do expectations about policy matter, but ( … ) very little else matters ”. the central bank determines the shortest money market rates through the key rate. the shortest rates, however, are of limited importance. economic agents ’ spending depends more on their interest rate expectations. in recent years, norges bank has strived to achieve greater transparency with regard to its monetary policy strategy. as from the beginning of 2003, the board has published its monetary policy strategy document for the next four months. the strategy was initially published at the end of the period to which it applied. since june 2004 it

the monetary policy framework in norway since 2001 ”, norges bank papers 1 / 2017. 2 see ministry of finance ( 2018 ) : “ new regulation on monetary policy, ” press release of 2 march 2018, or meld. st. 8 ( 2017 – 2018 ). ny forskrift for pengepolitikken. ( white paper from the ministry of finance. in norwegian only. ) 3 see norges bank ( 2018 ) : “ modernisation of the regulation on monetary policy ”, norges bank´s letter of 28 february 2018 to the ministry of finance. 4 / 4 bis central bankers'speeches