and the labour market is becoming tighter more quickly than expected. higher growth in the economy may in isolation suggest a faster increase in the interest rate ahead. this would reduce the risk of bottlenecks in the economy, with rising cost inflation and continued debt build - up. on the other hand, the objective of bringing inflation up towards the target and anchoring inflation expectations argues for restraint in the upward movement of interest rates. norges bank ’ s executive board decided at its meeting on 16 march to raise the sight deposit rate by 0. 25 percentage point to 2. 50 per cent. the current assessment indicates an interest rate path where the interest rate is raised by about 1 percentage point this year, in line with expectations in the market. the sight deposit rate should be in the interval 2¼ – 3¼ per cent in the period to the publication of the next inflation report on 29 june 2006, conditional on economic developments that are broadly in line with the projections. uncertainty surrounding the interest rate reflects the monetary policy response to unexpected disturbances to inflation, output and the exchange rate. we have illustrated the uncertainty surrounding forecasts for the interest rate, inflation and the output gap with fan charts. the width of the fan charts is based on historical disturbances. however, there is no certainty that future disturbances will be of the same nature and scale. the wider the fan charts are, the more uncertain the projections. conclusion increased globalization and the ensuing terms of trade improvements have exposed the norwegian economy to a significant upward income shock. this has magnified the domestic upswing. so far, however, strong growth impulses have not led to major imbalances or strong upward price pressures. this may be seen as an indication that the macroeconomic framework, most notably the fiscal and monetary policy regimes, has been quite successful so far in shielding the norwegian economy from excessive fluctuations. more importantly, while we adhere to the macroeconomic framework it will shield the economy when oil prices fall and our terms of trade are reversed. thank you for your attention!

, a protracted period of low interest rates and ample liquidity could compromise the market mechanisms in efficiently allocating resources, hence encouraging the roll - over of loans to non - profitable businesses and weakening incentives for balance sheet repair. prolonging low interest rates for a long time might raise the possibility of sudden shifts in market expectations and significant re - pricing of risks once indications of monetary policy tightening materialise. of course, these risks should also not be overrated at a time when financial risks are currently highly correlated with overall macroeconomic risks. exit is very likely to take place in an environment where credit has recovered and risks have receded in the economy, making the financial sector more robust to interest rate shocks. the current situation of subdued bank lending and outlook for growth in the euro area is a case in point. yet, monetary policy - makers have to be aware of these challenges and need to guard against the risk of financial dominance by keeping a clear focus on their respective mandate. for the ecb, our “ hardwired ” focus on price stability provides a clear guidepost that has proved effective in anchoring inflation expectations over time. and the prominent role given to money and credit developments in our strategy ensures a more symmetric reaction to financial forces over the cycle. at the same time, it is important that central banks continue to place particular emphasis on managing expectations. the ecb has all the instruments at hand to ensure a smooth exit if risks to medium term price stability should materialise. our credit operations are temporary and the market has all the information to date to anticipate their unwinding and make adequate adjustments to prepare. if liquidity conditions should prove too lax while central bank credit is still abundant, we have available instruments of liquidity re - absorption to tighten money market. some of these instruments have been tested successfully in the course of the crisis. finally, let me stress that a sound financial system is a necessary condition for an orderly exit, hence the importance of a swift implementation of the banking union in the euro area. this should include not only the single supervisory mechanism but also a single resolution mechanism, with a single resolution fund based on contributions by the industry and a common, last - resort fiscal backstop. this also includes the assessment of banks ’ balance sheets that will be undertaken in the transition to the single supervisory mechanism. i thank you for your attention. bis central bankers ’ speeches