also provides a stable framework for monetary policy. under such conditions, the effect of monetary policy instruments will be more predictable. the uncertainty facing economic agents is reduced through the establishment of credible fiscal policy guidelines. a stable operating environment is an important precondition when decisions that have long - term consequences shall be taken. this will also contribute to stability in financial markets. the guidelines that were introduced last year stated : “ fiscal policy has the main responsibility for stabilising developments in the norwegian economy ”. if fiscal policy is to continue to contribute to smoothing fluctuations in the economy at the same time that the guidelines for the phasing in of petroleum revenues are to appear credible, the guidelines should be applied in such a way that they place a strict limit on the average use of petroleum revenues over time. this means that if we use more than the expected return in one period, we must use less than the expected return in other periods. the guidelines allow the use of petroleum revenues to be adapted to some extent to the cyclical situation. fiscal policy will then ease the burden on monetary policy in the sense that the inflation target, and hence nominal stability, can be achieved with fewer changes in monetary policy. however, permitting a discretionary use of fiscal policy also involves temptations. it will probably always be easier to increase spending over government budgets during a downturn than it will be to reduce spending when the cyclical situation again improves. in that case, fiscal policy may prove to be more expansionary over time than implied by the guidelines. this will have to be countered by a tighter monetary policy, and there is also a risk that doubt arises as to whether the guidelines actually apply. the need for credibility may therefore in itself indicate that cyclical considerations should only very seldom lead to discretionary deviations from the main rule. automatic stabilisers will still have an effect. i believe that our politicians are aware of this risk. in the national budget for 2002, the budget balance was cyclically adjusted by nok 5. 1 billion, which shows that we are experiencing a period of strong expansion. the plans nevertheless called for the use of petroleum revenues in 2002 that was identical to the expected real return on the petroleum fund at the beginning of the fiscal year. hence, it is only via automatic stabilisers that fiscal policy will be adapted to the cyclical situation this year. i interpret this to mean that the threshold for departing from the main rule is high. structural effects on the norwegian economy as may be

labour force. at the same time, improved terms of trade will led to higher activity in the norwegian economy. capacity utilisation is expected to revert to a normal level in the second half of 2011. in the coming years, output in the mainland economy is expected to increase at an annual rate of 3 – 4 per cent. a strong krone and low external price impulses will continue to have a dampening impact on inflation, and inflation will remain below target for some time. further ahead, higher capacity utilisation and profitability in the business sector point to a pickup in wage growth. at the same time, the fall in import prices will slow. to conclude : norway has weathered the financial crisis better than most countries, and the economic recovery in norway is now on a firm footing. currently, interest rates are low, with the key policy rate at 2 per cent. in the years ahead, there are prospects for fairly strong growth in the norwegian economy, driven by solid income growth, rising investment and high population growth. on balance, the consideration of stabilising inflation, as well as developments in output and employment, imply a gradual increase in the key policy rate towards a more normal level. thank you for your attention. bis central bankers ’ speeches