employment, lower unemployment and lower wage shares than earlier. but we are uncertain how long this period will last. even if we use different models and anecdotal information, we cannot escape the need for a healthy portion of qualified judgement when making forecasts and setting the interest rate. my experience from as far back as the 1970s is that in the event of major disturbances and structural changes in the economy, one essentially has to rely on general insights about the functioning of the economy. models that rely heavily on regressions easily break down. as mervyn king, the governor of the bank of england, stated explicitly to the point2 : “.. that ’ s what we have to do with every variable that we look at, work out why it ’ s growing faster or slower than it was before and not to use some rather mindless regression. … the secret of good policy is to try and think trough what are the economics of the shocks hitting the economy at present. that in a nutshell is my philosophy of how you should do policy. don ’ t rely on regressions from the past. ” having discussed the role of monetary policy and rather complex economic models, i will move on to the final theme which may seem more prosaic, notably measuring current inflation. in general, the production level of economic statistics is probably very high in norway, as shown in international comparisons by the imf among others. it would also seem that it is very cost - effective. improvements are frequently made to the methodology and the compilation of cpi statistics. in august this year, the indices for electricity, books and air travel were revised. last year, statistics norway changed the method for the treatment of rents in the housing market, and the previous year the food index was revised. a general view is that changes in statistics production should be well documented and should place particular emphasis on identifying the effects such changes might have on measured inflation. furthermore, the statistics should be comparable, but not necessarily see mervyn king, governor, bank of england on the occasion of the tenth anniversary of the central bank's independence : ( see financial times, thursday, 3 may ). identical, across countries. it is positive that others are interested in and debate statistics production. 3 with an inflation target for monetary policy, measuring inflation is of particular importance. cpi inflation is used as a reference in the wage negotiations each spring. many financial contracts are linked to cpi inflation. a number of international studies have concluded that there are considerable

national budget for 1997, the ministry considered this matter and set the allocation to equities at 40 per cent 7. in the correspondence between norges bank and the ministry, there is also support for the fiscal rule ’ s assumption of a real return of 4 per cent with an equity allocation of 40 per cent. in 1998, the fund started investing in listed equity in 21 countries, all of them featuring a fairly well developed financial market. other countries were later incorporated into the benchmark portfolio. in 2007, small companies were included in the benchmark portfolio. today, the fund has equity holdings in 8, 000 companies in almost 50 different countries. the bond portfolio was expanded from 10 to 18 countries in 1998. since 2002, the fund has gradually moved into the corporate bond market and mortgage - backed securities. chart : fund returns in 1998, analyses indicated that returns would be higher than achieved to date. it should be noted that the fund is nevertheless considerably larger than expected 10 – 12 years ago. high oil and gas prices have resulted in substantial transfers to the fund. sizeable returns on oil in the ground have more than offset low returns on securities. since equity investment started in 1998, the annual average real return on the fund has been a good 3 per cent after expenses 8. this figure is partly a reflection of the financial crisis. the fund ’ s short history includes a lost decade in the stock market, with two periods of sharp decline. during financial crises of the type we have recently experienced, the government as investor has no place to hide. even though it is less visible, the return on government real investments in norway is also lower during economic downturns. the estimated size of norway ’ s offshore oil wealth naturally varies widely with oil and gas prices and frequent changes in petroleum reserve estimates. the ministry of finance now assesses the value of the government ’ s share of the remaining petroleum wealth at nok 3. 6 trillion, which is about nok 550 billion lower than the ministry ’ s estimate one year earlier. chart : ownership interests in summer 2007, the ministry of finance decided to increase the allocation to equity from 40 per cent to 60 per cent and reduce the allocation to bonds correspondingly. surging oil and gas prices, high oil production and favourable economic conditions for the norwegian economy led to high transfers to the fund in the course of 2007 and 2008. equity prices fell sharply through 2008. it was against this background that the fund purchased equities for more than nok