risk of imbalances building up in the credit and housing markets. even so, monetary policy cannot take primary responsibility for maintaining financial stability, which must be ensured by means of regulation and supervision of financial institutions. monetary policy can contribute to promoting employment the inflation target is symmetric. we seek to avoid both too high inflation and too low inflation. on the other hand, the objective of high and stable employment is asymmetric – the more people in employment, the better. since unemployment more readily moves up than down, we should respond quickly by cutting the policy rate when economic activity abruptly declines. for the same reason, we should be patient about raising the policy rate to avoid restraining the recovery too early. chart 4 shows the probability of finding a job one year after being registered as unemployed – whether as short - term or long - term unemployed, on a labour market programme, on initial time - limited benefit or permanent disability. 4 norges bank ( 2022 ) “ norges bank ’ s monetary policy handbook ”. norges bank papers 1 / 2022. norges bank chart 4 more people find work when demand is high economic perspectives 17 february 2022 transition to work by labour status. percent short - term unemployed long - term unemployed labour market measures on time - limited benefit on disability benefit normal situation high demand sources : norwegian labour and welfare administration ( nav ), statistics norway and norges bank persons aged 20 – 60. average for the years 1996 – 2017. time of measurement : q4 long - term unemployed : persons who were also unemployed in the two previous quarters. there are two things to note. first, there is a higher probability of finding a job in periods of high labour demand than in a normal situation. second, this also applies to those that are not registered as unemployed, which may include persons at risk of being permanently excluded from the labour market. high and stable employment is therefore not only about keeping unemployment low, but also about the size of the labour force. we must prevent periods of economic decline from leaving scars in the form of lower labour supply. by slowing the rate tightening cycle somewhat so that labour demand increases, the central bank can contribute to promoting employment. but when employment rises sharply and rapidly, wage growth has a tendency to accelerate. inflation usually follows suit. as shown in the chart 5, we have previously experienced that the rise in prices for domestically produced goods and services accelerates in the wake of a sharp rise in employment. chart 5 when employment rises rapidly,

low as possible. if the support schemes are too favourable, we risk undermining the banks ’ own motivation to maintain sound credit and liquidity policies. those who take risks must also be prepared to bear the losses. second, loans should only be given to banks that are solvent. the central bank ’ s role is not to help recapitalise banks. again, there is an important underlying principle here. if we are to take risk with our collective public money, then government funds must be used. and the decision to do so must be taken by a democratically elected body. third, both the scale and duration of support measures targeting financial markets should be limited. large - scale and protracted support schemes can impair normal market mechanisms. in keeping with the third principle, the extraordinary measures that norges bank introduced to support the smooth functioning of financial markets during the pandemic have now been unwound. the primary objective of monetary policy is low and stable inflation low and stable inflation is a main objective for norges bank. persistently high inflation is costly for society. it leads to uncertainty about the value of money and is an obstacle to planning. at the same time, some inflation is beneficial because it provides economic flexibility. during nicolai rygg ’ s time the krone was pegged to gold, the anchor. today, we aim to keep annual consumer price inflation at close to 2 percent over time ( chart 3 ). but our eye is not focused on the inflation target alone. as long as there is confidence that inflation will remain low and stable over time, variations around the inflation target entail limited economic and social costs. 3 norges bank ( 2021 ) “ norges bank ’ s liquidity policy : principles and design ”. norges bank papers 2 / 2021. norges bank chart 3 low and stable inflation is a primary objective economic perspectives 17 february 2022 consumer price index. twelve - month change. percent – 2 inflation inflation target five - year moving average – 2 sources : statistics norway and norges bank norway has a flexible inflation targeting regime. 4 monetary policy also aims to promote high and stable employment and mitigate the build - up of financial imbalances. high employment is beneficial for economic growth, for financing social benefit schemes and for the financial and living situation of individuals. financial imbalances can lead to a pronounced economic downturn. this is why we will, especially in an environment of very low interest rates, also take into consideration the