have a very rapid response time, as its instruments can be applied at short notice. this means that monetary policy can have the last move and can consider the decisions made in other policy areas. furthermore, experience shows that monetary policy is most effective in the long run if central banks are independent in applying monetary policy instruments but have clear objectives decided by elected representatives and are then accountable for their decisions after the fact. the framework for the interactions among the various components of economic policy must not limit this independence. this does not change the fact that, for these interactions to have maximum effectiveness, there must be a clear understanding of which factors will determine the decisions of each party. and the greater the consensus on the analysis of the situation and outlook, the more effective it will all be. one way to promote this is to establish a forum for discussion and exchange of information without restricting each party ’ s legally defined role. in this context, i bis central bankers ’ speeches welcome the forthcoming establishment of a macroeconomic council with representation from the government, the labour market, and the central bank. it has also been decided that the monetary policy committee and the systemic risk committee, which prepares analysis and recommendations for the financial stability council, will hold a joint meeting at least once a year. the first such meeting took place last november. honoured guests : the financial system plays an important role in the functioning of modern society, in channelling diversified saving towards a profitable but larger investment, assessing and diversifying risk, and intermediating payments between parties in the economy. it would be difficult to engage in modern external trade if we did not have some sort of domestic banking system that worked with foreign banks and could transmit payments across borders. the financial system is therefore an inalienable part of value creation in a modern society. its importance is often forgotten in the heat of negative discourse but is never as clear as when things go wrong – as they did in the financial crisis. the structure and condition of the financial system at any given time is determined by historical factors, economic and market conditions, the regulatory environment, technology, and culture and ethics. the central bank and the regulatory environment are also part of the financial system. the public sector can affect developments in the financial system through the regulatory framework, through transactions with the system – not least through the central bank – and by affecting culture and ethics. at present, the system is shaped by the financial crisis and the responses to it, including the capital controls. it is a relatively homogeneous system

the strong current account surplus will persist for the entire forecast period, which extends until 2018, in part because national saving will remain above the historical average. in this context, we must bear in mind that things can change quite suddenly. it is also worth noting that numerical economic forecasts, by their very nature, have a tendency to be much more stable than historical reality. in the recent past, we have reaped the benefits of developments abroad, but we do not know how long this will last, and tailwinds could turn into headwinds. history also tells us that we have a tendency to make economic policy mistakes during booms and mistake temporary positive shocks for permanent improvements. if history repeats itself, domestic demand and inflation could increase more than is assumed in the forecast. we must therefore be vigilant and be careful when taking the decisions that lie ahead. the central bank ’ s next comprehensive analysis of economic developments and prospects will appear in monetary bulletin in mid - may. honoured guests : as has been reported, the central bank bought large amounts of foreign currency in 2015 and has continued to do so this year. from may 2013, when the bank began its regular fx purchase programme, until the close of business yesterday, the bank was a net buyer of foreign currency in the amount of 471 b. kr. some of this currency has been used to pay down foreign debt and the rest to increase the size of the foreign exchange reserves. both of these measures increase the proportion of the reserves financed in kronur. at the end of february, the reserves totalled 721 b. kr. including 382 b. kr. financed in kronur. this has reduced foreign liquidity risk, of course, but it would also have a large negative impact on the bank ’ s finances if such an arrangement persisted, as domestic interest rates are much higher than the rate of return on the reserves. this point is discussed in greater detail in the bank ’ s annual report, which is available here today. the report states that, as of year - end 2015, the negative interest rate differential on the bank ’ s foreign exchange balance was 18 b. kr. on an annualised basis. the forthcoming auction of offshore kronur could change this position radically, however, and as a result, there is no reason to despair about the central bank ’ s finances. furthermore, it is at the core of central banking to prioritise macroeconomic objectives over the