1990s, changes in the key rate were also linked to large currency inflows or outflows that might indicate substantial imbalances in our economy. in the past 10 – 12 years this has changed completely. norges bank operates a target set by the government authorities, and interest rate changes are nearly always small and rarely come as a surprise to economic agents. while these changes may appear to be important, it would be to inflate the wording to characterise them as matters of special importance. when in more critical situations, such as autumn 2008, a need arises for more pronounced changes in interest rate and liquidity policy, the bank has without a doubt an obligation to submit the matter to the ministry. there must always be a good flow of information from norges bank to the ministry of finance. norges bank has a special position in public administration. this is expressed, for example, in the instructions section of the norges bank act. while ministries in norway, in contrast to sweden for example, can easily issue instructions to their subordinate agencies, this provision sets strict formal requirements for instructing the bank. this power cannot be delegated by the council of state to the ministry of finance. the bank shall be consulted in advance and the storting shall forthwith be notified of the reason for the instruction. former supreme court justice carsten smith has stressed that the act must be interpreted to mean that this must be set out in a separate report and under full transparency. 39 the following is stated on page 3 of the recommendation from the standing committee on finance and economic affairs concerning the act relating to norges bank and the monetary system etc. ( recommendation no. 50 ( 1984 – 85 ) to the odelsting : “ a new norges bank act should be able to be adapted to various scenarios. in line with this, the committee proposes a general clause for the bank ’ s activities and that the council of state be authorised to lay down further guidelines in a number of areas ”. carsten smith ( 1992 ) : rettstenkning i samtiden [ contemporary legal thinking ], p. 410. universitetsforlaget. in its consultation statement on the new norges bank bill, the ministry of justice through its legislation department expressed the view that the right to issue instructions should be in closer keeping with ordinary rules relating to government administration, adding : “ we note for the record our agreement that there are strong arguments for limitations on instructing norges bank on

associated with monetary policy and more effectively anchor longterm inflation expectations. in his view, however, the introduction of a long - term inflation target is fully consistent with current us monetary policy 1. there has been little interest in us political circles in changing the monetary policy framework 2. pursuant to the regulation of march 2001, the mandate for monetary policy stipulates that monetary policy shall be aimed at stability in the norwegian krone ’ s national and international value, and at the same time underpin fiscal policy by contributing to stable developments in output and employment. the operational objective of monetary policy is low and stable inflation, with annual consumer price inflation of approximately 2. 5 % over time. the mandate implies that inflation targeting shall be flexible, so that weight is given to both variability in inflation and variability in output and employment. the concrete target for inflation varies somewhat among central banks. the inflation target may be formulated as an interval, for example 1 - 3 per cent, as in new zealand or, as in norway, as inflation of close to 2. 5 per cent over time. partly owing to various disturbances to the economy, inflation cannot be expected to remain at target constantly. central banks have somewhat varying formulations as to how rapidly inflation should be brought back to the target. some central banks state that inflation should be brought back to target within a “ reasonable time horizon ” or “ over the medium term ”. others have quantified that the inflation target should normally be attained within two years, as in sweden, or as in norway, where the interest rate is set with a view to stabilising inflation at the target within a reasonable time horizon, normally 1 – 3 years. in practice, the monetary policy conducted by most central banks is nonetheless similar. they orient monetary policy towards maintaining low and stable inflation. all central banks will reduce their policy rate when there are prospects of low inflation in the medium to long run and raise it when there are prospects of high inflation. what distinguishes norges bank from other central banks? monetary policy in norway is in line with the monetary policy conducted by a number of central banks in the oecd area. one difference, however, is that norges bank is conducting monetary policy in an oil economy. as a result of the high level of earnings and fluctuations in these petroleum revenues, the most important contribution fiscal policy can make to stabilising the norwegian economy is to provide a sound, longterm strategy for the use of petroleum revenues. in other words