pursued will be of importance for how the adjustment takes place. in norway, monetary policy is geared towards keeping inflation low and stable. the operational target of monetary policy is consumer price inflation of close to 2. 5 percent over time. the inflation target provides the economy with a nominal anchor. when inflation expectations are firmly anchored, monetary policy serves as the first line of defence when the economy turns down. over time, monetary policy can only influence inflation. monetary policy cannot assume a primary responsibility for delivering the necessary structural changes in the norwegian economy. but via the exchange rate channel, monetary policy can help facilitate the necessary restructuring process. without our own national currency the situation would be more challenging. the social partners would have to go it alone. the experience of some european countries shows that this can be demanding. with a floating exchange rate, the necessary adjustment of the cost level can take place faster, and may prove less painful. the krone exchange rate can function as a stabiliser. the depreciation of the krone through autumn last year indicates that this mechanism is functioning ( see chart 8 ). the monetary policy credibility built up over the years is now of considerable benefit. continued confidence that inflation will remain low and stable over time is a necessary precondition for a pronounced weakening of the krone concurrent with a low key policy rate. the benefit associated with a currency of our own disappears if the temporary rise in inflation associated with a krone depreciation is countered by higher wage increases. the result would be a higher key policy rate and a stronger exchange rate than would otherwise be the including reserves that have been approved for development by holders of oil rights and other proven resources in fields and discoveries. source : the shelf in 2014, norwegian petroleum directorate. bis central bankers ’ speeches case and, not least, higher unemployment. the social partners have a particular responsibility in this regard. in december last year, norges bank lowered the key policy rate by 0. 25 percentage point to 1. 25 percent. norges bank gave weight to the weakening of the growth outlook for the norwegian economy observed through autumn. already last winter, oil companies announced a period of downscaling, with cuts in investment, headcounts and costs. this tendency is being reinforced by the sharp fall in oil prices, which is having adverse spillover effects on the mainland economy and may lead to higher unemployment. low interest rates may increase the risk that debt and asset prices reach unsustainable levels. financial imbalance

##fg has grown in size. oil prices have fallen sharply over the past six months. even if prices edge up again, we have been reminded of the uncertainty associated with future revenues. lower oil prices imply slower growth in the gpfg than previously estimated. in the longer term, this means less money in the national coffer, with an attendant reduction in norway ’ s fiscal space. at an oil price of around usd 60 per barrel, transfers to the gpfg may come to a halt. rather, it seems that at today ’ s level of petroleum revenue spending there will soon be a need to make transfers from the gpfg to the fiscal budget. measured as a share of gdp, the gpfg may have already reached the peak. calculations in the national budget for 2015 illustrate this point ( see chart 15 ). the broken red line shows the trajectory for fiscal space assuming a real return of 4 percent. the estimation is based on the oil price level prevailing late last summer. if the return is closer to 3 percent, there will be little room for increasing petroleum revenue spending over the fiscal budget. on the contrary, in the course of a few decades, petroleum revenue spending as a share of gdp will have to be reduced, that is to say fiscal policy will have to be tightened. if, in addition, the oil price settles more permanently around the level observed so far this year, fiscal policy must be adjusted earlier. if petroleum revenue spending follows the real return, we will be heading for a period of sizeable fiscal retrenchment each year. in addition, pension obligations will show a pronounced rise further ahead. the fall in oil prices has been a reminder of the uncertainty surrounding future petroleum revenues. the same applies to the return on gpfg capital. the three paths illustrate the uncertainty we are facing, but they also illustrate another important point. spending the return will ultimately lead to a flattening of the gpfg, which will then decline as a percentage of gdp. it has always been clear that this will happen at some point in the bis central bankers ’ speeches future. what is new is that this may be the case here and now. at today ’ s oil price, the gpfg may have reached the peak. in that case, petroleum revenue spending as a percentage of gdp must be reduced to avoid using more than the return on the gpfg. even if the oil price and the rate of return follow a path that allows the gp