as the outlook for the norwegian economy has improved. economic activity is now approaching a normal level, and inflation is projected to move up in the period ahead. our latest analyses, presented in march 2018, suggest that the key policy rate will most likely be raised after summer 2018. at the same time, the executive board has given weight to the consideration that uncertainty as to the effects of a higher interest rate suggests a cautious approach to interest rate setting. chart : consumer prices looking at the wider picture, we can, 17 years after inflation targeting was formally introduced in norway, draw the conclusion that the system has functioned well. we can now look back on a quarter of a century of low and stable inflation. chart : fluctuations in output and employment a monetary policy oriented towards low and stable inflation has not compromised stability in the real economy – in fact, the opposite is true. employment variability has been lower since 2001 than in previous periods, despite the substantial shocks that have impacted the norwegian economy. 2 / 4 bis central bankers'speeches however, lessons have been learned along the way. initially, most inflation - targeting central banks emphasised the importance of steering inflation towards the target within a clearly defined time horizon. experience of this regime provided useful insight, and ambitions were later adjusted. international events, such as falls in global commodity prices and other major changes in export and import prices, can have a considerable impact on small open economies. this can result in wide fluctuations in inflation that cannot be counteracted without having a substantial impact on the real economy. norges bank has addressed this concern by giving greater weight to output and employment. the inflation target horizon has been extended and monetary policy has gradually become more flexible. chart : monetary policy mandate the benefits of flexible inflation targeting were emphasised when the government in march 2018 presented a new regulation on monetary policy. the new regulation specifies that inflation targeting shall be forward - looking and flexible, so that it can contribute to high and stable output and employment and to counteracting the build - up of financial imbalances. in the interest of long - term economic stability, fiscal policy, monetary policy and the wage formation process must complement each other. a shared understanding of how these components interact is very important. monetary policy ’ s most important contribution to economic stability is to maintain monetary value through low and stable inflation. both too high and too low inflation can involve costs to society, with arbitrary wealth redistribution, underinvestment and scarce resources that may be misallocated or

of countries globally. in 2008 it was decided to increase the share of emerging market assets in the fund ’ s benchmark portfolio. thus, investments in these markets have grown. the government has stated that the expected annual return on the fund will be close to 4 per cent over time. since its establishment, the average return has been 2. 7 per cent. it was only a little more than a year ago that we witnessed the steepest fall in global capital markets in our time. by maintaining the fund ’ s risk profile it is fairly probable that the average return will gradually approach 4 per cent again. last year was the best in the fund ’ s history. gains in international equity and fixed income markets led to a record annual return of 25. 6 per cent in 2009. 3 however, developments in government pension fund global – annual report 2009. 2009 must to a large extent be viewed in light of the financial crisis and are mainly due to a reversal of the negative results in 2007 and 2008. multilateral approach to global challenges finally, let me turn to the international economic order and developments in multilateral institutions over the past few years. the international order and norway in recent years, increasingly assertive non - statutory bodies have emerged in the area of international economic and financial collaboration, most notably the g20. when the global financial crisis unfolded, the g20 4 rose to the task. nevertheless, i believe that the role of non - statutory bodies and the statutory institutions, such as the international monetary fund ( imf ) 5, must be reconsidered to promote the necessary multilateral approach to global governance. norway has a long - held tradition of participating actively in multilateral cooperation and institutions has actively backed the multilateral responses to the financial crisis. as a global investor with an open market economy, norway has a strong and vested interest in the wellbeing of global financial markets. this interest is shared with most market participants, large and small. we have a common interest in a market - based international order, supporting a level playing field and sound economic governance. lessons from the crisis a key lesson from the global crisis is the need for multilateral cooperation and collective action. it relates to the framework for polices on prevention, resolution, reform and implementation. it also relates to the institutional set - up. the imf has played a pivotal role in presenting the initial lessons from the crisis, in providing finance to countries with temporary balance of payments needs, and in preparing the overall framework for