speech higher policy rate will curb inflation introductory statement by governor ida wolden bache at press conference following announcement of the policy rate and publication of monetary policy report 3 / 22 chart 1 policy rate raised norges bank ’ s monetary policy and financial stability committee decided to raise the policy rate from 1. 75 % to 2. 25 % at its meeting on 21 september. the policy rate will most likely be raised further in november. norges bank ’ s task is to keep inflation low and stable. the operational target is inflation of close to 2 percent over time. we are also mandated to help keep employment as high as possible and to promote economic stability over time. we are raising the policy rate with the aim of bringing down inflation. price stability is important for the economy to function well. it reduces uncertainty and facilitates planning. those with low incomes and small margins are normally the hardest hit when inflation suddenly surges. the main contribution monetary policy can make to promoting high employment over time is to ensure low and stable inflation. as long as there is confidence that inflation will remain low and stable, the costs of minor deviations from the target of 2 percent are fairly insubstantial. but if households and firms expect inflation to be elevated and high inflation is incorporated into price and wage setting, inflation may take root, and bringing it down again could prove difficult. chart 2 : inflation is high consumer price inflation is now rising rapidly both globally and in norway. inflation in many countries is the highest seen in decades, and central banks in many trading partner countries have responded by raising their policy rates substantially over a short time. in norway, inflation is markedly above our 2 percent target. twelve - month consumer price inflation was 6. 5 percent in august, far higher than we expected before summer. prices for electricity and other energy products have risen to historically high levels. but prices for a range of other goods and services are also rising faster than normal. the consumer price index adjusted for tax changes and excluding energy products - the cpi - ate - was 4. 7 percent higher in august this year than one year earlier. prices for both imported goods and domestically produced goods and services are rising at a fast pace. we project that inflation will remain higher for longer than envisaged in june. the tight labour market has contributed to pushing up wage growth. there are signs of higher electricity prices ahead than anticipated earlier, and we expect firms to pass on some of the cost increase to selling prices. we also believe it will take

with future revenues. the oil fund mechanism shields fiscal policy from such revenue fluctuations in the short term. we have the fiscal space to stimulate overall demand if this should prove necessary again. but we must also remember that, with lower oil prices, the government will over time have less money to spend. fiscal tightening may become necessary further ahead. refraining from increasing petroleum revenue spending further from today ’ s level is a sensible risk adjustment. the era of rising petroleum revenue spending should for the most part be behind us. the more than 40 - year old white paper about the role of the petroleum industry in norwegian society was both far - sighted and accurate. the restructuring it described has occurred, although the growth in prosperity that followed in its wake was more difficult to predict. the emergence of an advanced oil service industry is an industrial success story. we have extracted large quantities of oil and gas in a period of very high prices. and we have set aside a large proportion of the revenues – for the benefit of future generations. in spite of some mistakes and a fair share of luck along the way, we would have to say that norway ’ s petroleum wealth has so far been managed well. norway ’ s oil age is far from over. but activity in the petroleum sector has passed the peak. we must also be prepared for lower returns in the oil industry. in the period ahead, we should keep an important insight in mind : the key to economic progress is the ability to restructure. thank you for your attention. bis central bankers ’ speeches