economic history shows that inflation and inflation expectations can become unhinged. there are many self - regulating mechanisms in the economy, but inflation does not regulate itself. the inflation target of 2. 5 per cent also provides a framework for the social partners. over time, nominal wage growth above 2. 5 per cent will entail higher real wages and higher purchasing power. real wage growth that exceeds productivity growth may lead to higher inflation and higher interest rates. in government - financed enterprises, which are often labour - intensive, budgets are adapted to expected wage growth. this is usually in line with assumptions about cost inflation in the economy as a whole and with the inflation target. if wages rise more than this, efficiency must be increased in order to minimise the adverse impact on service production and customers. calmfors and driffill ( 1988 ) : “ bargaining structure, corporatism and macroeconomic performance ”, in economic policy, april, 14 - 61 and driffill ( 2006 ) : “ the centralization of wage bargaining revisited. what have we learned? ” in journal of common market studies, vol. 44, no. 4, november, 731 - 756. all economic agents can plan ahead on the assumption that inflation will be about 2. 5 per cent over time. this is the most valuable contribution norges bank can provide the social partners and other economic agents. thank you for your attention.

is now very low. the labour market is tight. unemployment has not been as low since the second half of the 1980s, and employment has risen sharply this year. wage - earners and enterprises have both fared well. cheap imported goods have resulted in a subdued rise in consumer prices and a substantial increase in wage - earners ’ real wages. high export prices have restrained the rise in real labour costs. combined with high productivity growth, this has resulted in high corporate earnings and solid growth in employment. at the same time, wage - earners share of corporate value added has been reduced, from around 75 per cent at the end of the 1980s to 70 per cent at the end of the 1990s, and now stands at below 65 per cent. solid productivity growth and high prices for export goods and deliveries to the petroleum sector have contributed to the reduction in the wage share over the past few years. the ample supply of labour has probably had a dampening effect on wage growth. increased globalisation may have provided greater opportunities for norwegian enterprises to relocate production to other countries if labour costs become too high. this probably places some restraint on wage demands among workers in sectors where enterprises have such opportunities. historically, a high wage share has tended to be accompanied by low unemployment. developments in recent years have provided the basis for strong growth in employment while the wage share has fallen. is it possible to sustain the combination of low unemployment and a low wage share? first, it partly depends on whether the positive supply - side conditions are sustained. there is probably symmetry here. should the terms of trade deteriorate, productivity growth slacken and foreign workers return to their home country, the wage share will increase, profits fall and unemployment increase. there is now a prospect of slower global growth. there are also signs that the strong growth in productivity that has been evident in other countries – for example in the us – is moderating somewhat. and we may see a similar trend in norway. second, even without a reversal, profits may fall and unemployment rise. the implications of this will depend on how far businesses, in their search for qualified labour, will go in bidding up wages. it will also depend on how wage - earners react and on their ability to adapt to change. furthermore, it must be expected that the strong krone will shave profits in some enterprises and industries at the moment, even though many have used currency hedging to safeguard their income. even though demand for labour is strong, there is