economic history shows that inflation and inflation expectations can become unhinged. there are many self - regulating mechanisms in the economy, but inflation does not regulate itself. the inflation target of 2. 5 per cent also provides a framework for the social partners. over time, nominal wage growth above 2. 5 per cent will entail higher real wages and higher purchasing power. real wage growth that exceeds productivity growth may lead to higher inflation and higher interest rates. in government - financed enterprises, which are often labour - intensive, budgets are adapted to expected wage growth. this is usually in line with assumptions about cost inflation in the economy as a whole and with the inflation target. if wages rise more than this, efficiency must be increased in order to minimise the adverse impact on service production and customers. calmfors and driffill ( 1988 ) : “ bargaining structure, corporatism and macroeconomic performance ”, in economic policy, april, 14 - 61 and driffill ( 2006 ) : “ the centralization of wage bargaining revisited. what have we learned? ” in journal of common market studies, vol. 44, no. 4, november, 731 - 756. all economic agents can plan ahead on the assumption that inflation will be about 2. 5 per cent over time. this is the most valuable contribution norges bank can provide the social partners and other economic agents. thank you for your attention.

. in our conduct of monetary policy, we must not underestimate the uncertainty surrounding the decisions taken. even if the bank publishes a forecast for the interest rate, this does not mean that the interest rate will follow the forecast throughout the projection period. forecasts of inflation, output, the interest rate and other variables are based on an assessment of the current situation and a perception of how the economy functions. disturbances to the economy may result in changes in the forecasts. data revisions imply that the current economic situation is not fully known. our ambition must be to reduce uncertainty with regard to our own response pattern. that actual interest rate developments will deviate somewhat from norges bank's forecast will probably be the rule rather than the exception. overall, inflation measured by the cpi - ate is projected to pick up gradually over the next three years towards 2. 5 %. developments since june have resulted in somewhat lower inflation than expected, and we must take this into account when drawing up the next inflation report. looking ahead, labour shortages are expected to push up wage growth this year and next. pressures in the economy are expected to continue to build up before receding towards a normal level. the forecasts are uncertain and we also attempt to shed light on this. the figure illustrates the uncertainty surrounding the forecasts. the wider the fan chart is, the more uncertain the forecast. the uncertainty implies that the interest rate should normally be changed gradually, so that we can assess the effects of interest rate changes and other new information about economic developments. changes in forecasts are nothing new to financial market participants, who frequently change their expectations concerning future interest rates as the economy is exposed to disturbances. the deviation between market expectations and the actual interest rate has been substantial in periods. there is no reason to believe that norges bank will not also have to reassess its interest rate forecasts as new information emerges about economic developments. according to the monetary policy strategy in inflation report 2 / 06, the sight deposit rate should be in the interval 2¾ - 3¾ per cent in the period to the publication of the next inflation report on 1 november, conditional on economic developments that are broadly in line with projections. monetary policy is oriented towards a gradual increase in the interest rate - in small, not too frequent steps towards a more normal level. the analyses in inflation report 2 / 06 were based on a gradual increase in the interest rate towards a more normal level. in the first six months of 2006, the key rate