rate changes in the period 3 june 1997 – 18 april 2001 have come as more of a surprise to market participants than interest rate changes in continental europe and the us during the same period. the same study indicates that the element of surprise has waned over time. in norway, it appears that transparency in norges bank ’ s interpretation of the mandate and in the implementation of monetary policy has contributed to making monetary policy somewhat more predictable. the chart shows that norges bank ’ s changes in the key rate have less impact on money market rates now than earlier. the academic literature on transparency and monetary policy is voluminous and growing. " how do central banks talk? ", a report prepared by a number of well - known academics and presented recently at the center for economic policy research, specifies the objectives that central banks should bear in mind when developing their strategy on transparency. the report says the following : " transparency should allow the public to understand, and possibly anticipate, the central bank ’ s decisions, to see each of them as the logical conclusion of a chain of past and future decisions aimed at a clear set of targets, … " ) this view of transparency and predictability contrasts sharply with the earlier practice of playing on the element of surprise. in monetary policy, this was associated especially with control of the exchange rate. gradually, the economic policy met distrust and high premiums for uncertainty. the effects of changes in monetary policy instruments became increasingly uncertain. nevertheless, a desire for predictability must not precede the demand for an interest rate setting that the central bank deems to be correct. the expectations of other economic agents must not control the setting of interest rates. there are a number of examples from countries with " transparent " monetary policies where interest rate changes have come as a surprise. this may be partly due to the fact that the central bank had a wadhwani, s. b : " some reflections on the mpc ". speech to the national association for business economics. washington 21 may 2001 blinder, a., c. goodhart, p. hildebrand, d. lipton, c. wyplosz : " how do central banks talk? " report to be presented at the third geneva conference on the world economy on may 4, 2001 different view of the outlook for economic developments. the inflation outlook may also change rapidly and prompt rapid and possibly pronounced interest - rate adjustments. transparency may be discussed in relation to · objective function · reaction function · analyses

. calculations based on alternative assumptions are presented regularly. this illustrates the isolated effect on price inflation of changes in assumptions. it provides insight into the effect on price inflation of potential disturbances to the economy. we base our analyses and assessments of the inflation outlook and balance of risks on models. the rimini macroeconomic model, developed in norges bank ’ s research department, has been an important tool for the bank ’ s analyses since 1994. the model seeks to take account of many of the important relationships in the norwegian economy. the model combines and takes account of empirical and theoretical knowledge of these relationships as they have functioned in the past, and contributes to a more consistent analysis of the interaction between them. it takes time for structural changes to be captured in the model. it may therefore be useful to analyse the effects of any structural changes in previously existing relationships. for example, it may be useful to ask whether the effects on consumer prices of changes in the exchange rate are different now that the exchange rate fluctuates more than it did in the past. in our experience it is not possible to make forecasts that prove to be accurate in all respects. by revealing errors, we provide a basis for improving the analysis. our projections are therefore evaluated regularly. analyses of forecast errors have been presented four times in the journal economic bulletin. excerpts from these evaluation articles are also presented in the inflation report once a year. concluding remarks in all countries with which it is natural to compare norway, the setting of interest rates, the most important monetary policy instrument, is delegated to the central bank. a number of factors help to explain why the exercise of this authority is delegated. first, monetary policy can well be delegated, because over time there is no real conflict between the objectives of price stability, on the one hand, and economic growth and equitable distribution, on the other. the formulation of objectives and subsequent evaluation of practice make adequate provision for the more short - term considerations. second, it is possible to formulate fairly precise objectives for monetary policy and establish reporting routines that ensure that those who delegate authority can subsequently evaluate the implementation. norges bank provides an account of its actions in the bank ’ s annual report, and the evaluation of the ministry of finance, the government and the storting appears in and is based on annual reports to the storting. finally, the need for transparency and communication argue in favour of delegation. as previously mentioned, each monetary policy decision must be consistent with