are wide differences across industries. the norwegian wage formation model is characterised by a high degree of coordination, and the social partners take into consideration employment and firms'2 / 5 bis - central bankers'speeches profitability when negotiating wages. experience has shown that wage growth adjusts faster in norway than in other countries when the economy turns. this reduces the risk of wage price spirals, which thereby lessens the need for monetary policy tightening in response to a cost shock than would otherwise have been the case. after the pandemic, norges bank was one of the first central banks to raise its policy rate in autumn 2021. but policy rates were then raised substantially in many countries through 2022 in response to the surge in inflation. the policy rates of many of norway's main trading partners are now at their highest levels since the 2008 financial crisis. chart 6 : policy rates have been raised more abroad than in norway since last spring, foreign interest rates have risen more than norwegian interest rates. combined with the turmoil in financial markets, this has likely contributed to the krone depreciation. norges bank is mandated by the ministry of finance to carry out the foreign exchange transactions necessary under the petroleum fund mechanism. in the current period, norges bank's krone sales reflect the sizeable foreign currency revenues earned by oil and gas companies owing to high gas prices. the companies have converted large amounts of foreign currency into nok for tax payment purposes. norges bank, on behalf of the government, will convert the portion of government petroleum revenues in nok that is not spent via the central government budget back into foreign currency, which is then deposited in the government pension fund global. the transactions are planned and smoothed over the year and are announced ahead of each month. these currency conversions are not an element of monetary policy. chart 7 : the krone has depreciated norway has a floating exchange rate. this means that the policy rate can be set at the level appropriate for the outlook for the norwegian economy, and we have room to practice flexible inflation targeting, which also enables monetary policy to give weight to the aim of maintaining high employment. the floating krone exchange rate has been able to act as a shock absorber for downturns in the norwegian economy. in periods where oil prices have fallen and the economy has moved into recession, the krone exchange rate has depreciated and contributed to strengthening competitiveness and preventing inflation from moving too low. nevertheless, interest rate setting is

. in 2022, norges bank decided to raise the countercyclical capital buffer rate for banks to 2. 5 percent, effective from march 2023, which brings the rate back to its pre - pandemic level. norges bank continuously and closely monitors financial market developments and has a contingency framework for taking measures required to safeguard financial stability if needed. let me conclude. the current high rate of inflation follows a long period of low and stable inflation in our part of the world. some of the driving forces that kept inflation low in the decades before the pandemic may be going into reverse. globalisation has been met with gradually growing opposition. demographic trends are changing. combined, this could make the job of keeping inflation low more demanding. 4 / 5 bis - central bankers'speeches the global economy will increasingly be impacted by climate change and the need to reduce emissions. understanding the economic effects of climate change and the energy transition is essential for making forecasts and the right trade - offs in the conduct of monetary policy. this is therefore defined as a focus area in norges bank's strategy 2025. the main contribution monetary policy can make to the transition is to ensure low and stable inflation. a flexible and forward - looking inflation targeting regime, where we look through short - term inflation fluctuations, is a good basis for addressing the structural changes we are facing. a small open economy like norway will be exposed to shocks, as we have acutely experienced in recent years. economic policy cannot shield the economy totally from shocks that may arise, but can dampen their impact. a framework that provides monetary policy predictability makes it easier to succeed. thank you for your attention. 5 / 5 bis - central bankers'speeches