norwegian economy. employment is rapidly rising and unemployment has exhibited a marked decline. there are signs of higher wage growth and expectations of rising inflation. at the same time, the krone exchange rate has depreciated from strong values. • the interest rate path presented in inflation report 3 / 06 will provide a reasonable balance between the objective of bringing up inflation towards target and the objective of stabilising developments in output and employment, conditional on the information currently available to norges bank. • monetary policy influences the economy with a lag. over several years, interest rates have been considerably lower than what norges bank considers to be a neutral level. the interest rate may gradually be raised to a more normal level at a somewhat faster pace than envisaged earlier, although it is unlikely that rates will be raised at every monetary policy meeting. based on norges bank ’ s current assessment, the interest rate will thus continue to be raised in small, not too frequent steps if economic developments are broadly in line with projections. • the sight deposit rate should be in the interval 3¼ - 4¼ per cent in the period to the publication of the next inflation report on 15 march 2007, conditional on economic developments that are broadly in line with the projections. new information may reveal aspects of economic developments that indicate that the norwegian economy is moving on a different path than projected. on the one hand, major shifts in trade patterns, strong competition, weaker global growth or a stronger krone exchange rate may result in low inflation. on the other hand, low real interest rates or a further depreciation of the krone may lead to a higher - than - projected rise in output and inflation. projections are uncertain. disturbances in the economy will affect interest rate developments. this reduces the uncertainty about developments in prices and output. monetary policy cannot fine - tune economic developments, but it can prevent the largest effects from occurring when the economy is exposed to disturbances. in some situations, it may be appropriate to guard against particularly adverse developments. in the baseline scenario, the interest rate is gradually raised to a more normal level. norges bank continuously assesses the effects of interest rate changes and other new information concerning economic developments. thank you for your attention.

on short - term assignments in norway. in spite of solid corporate profitability and an unemployment level that has earlier triggered markedly higher wage growth, real wage growth from 2005 to 2006 will probably be moderate. nevertheless, unemployment fell rapidly through the summer. the main agreements in the centralised wage settlements had then been concluded. the social partners may therefore have assumed that the labour market would be less tight than currently implied by employment and unemployment figures. some groups negotiate wages locally in the autumn. wage growth may be higher than average for these groups. systematic information about these negotiations is limited, however, before the first months of 2007. in the last rounds of interviews with our regional network, an increasing number of companies reported that wage growth in 2006 will be higher than budgeted early this year. the level of unemployment that is consistent with stable real wage growth is uncertain and probably varies over time. we have assumed that increased economic integration across countries, both in the form of an increase in inward labour migration and intensified competition in product markets, may have a dampening effect on wage demands for a given level of unemployment. in the period ahead, a tight labour market is expected to result in higher real wage growth. nevertheless, it is assumed that labour inflows will have a dampening impact on wage demands, so that real wage growth will be a little lower in the next few years than in previous periods of equally low unemployment. the upward pressure on price and wage inflation given the level of current resource utilisation, as reflected in the output gap, is estimated to be lower than in the previous expansion even though the unemployment rate is at approximately the same low level. this is due in part to high productivity growth in recent years. growth in disposable income has been high in recent years. lower interest expenses and relatively high real wage growth have resulted in an increase in household purchasing power. the rise in house prices may also have fuelled growth in private consumption. with high growth in employment and falling unemployment, consumption growth is expected to be high in the period to the end of the year and into next year. as the interest rate level gradually normalises, household interest expenses will increase. household interest - bearing debt is approximately nok 1300 billion. according to our interest rate forecast, which i will return to later, the interest rate in 2008 will be more than 2 percentage points higher than in 2006. such an interest rate increase will have a pre - tax effect on household income of roughly nok 25