stefan ingves : norges bank 200 years speech by mr stefan ingves, governor of the sveriges riksbank and chairman of the basel committee on banking supervision, at the celebrations to mark norges bank ’ s ( central bank of norway ) 200th anniversary, oslo, 16 june 2016. * * * sweden and norway have a lot in common. we understand one another ’ s languages. we have a common labour market, though it is nowadays mainly swedes who travel to norway to work. and we get a little irritated when our ski champions lose to our neighbours. but above all, we have in many respects a common history. today we are celebrating the 200th anniversary of norges bank. however, the monetary history of norway starts even further back in time, 1000 years earlier, when the vikings spread fear throughout europe. coins first arrived in nor - way with vikings returning from raids in england. in 995 ad the first christian king, olav trygvason, came to power in norway. he is also important in numismatic history since the first known norwegian coin is a penny attributed to him. around the same time, the first swedish coin was minted by sweden ’ s first christian king, olof skotkonung. there have been many links between sweden and norway throughout the centuries, from the kalmar union of norway, denmark and sweden in the late middle ages to the union between sweden and norway in the 19th century. during the napoleonic war, sweden lost finland to russia and in the kiel peace treaty of january 1814 it was decided that norway, which was then a part of the danish kingdom, should instead join sweden. the treaty was of course op - posed by the norwegians, and during the spring of 1814, when sweden was occupied with wars on other fronts, the norwegians took action. they declared their independence, drew up a constitution and appointed a committee to plan a new norwegian central bank. but in july swedish soldiers arrived. after a brief battle, norway accepted the swedish king as king of norway. however, the union created was fairly loose. except for the foreign service, norway retained all state institutions that characterize an independent state. in june 1816, exactly 200 years ago, norges bank was established. the bank was located in trondheim far from the politicians in kristiania ( which we now know as oslo ) and even further away from stockholm and the swedish king. norges bank was founded in a challenging environment

with a successful consolidation of the government finances, have essentially succeeded in achieving what we had hoped for. sweden has gone from being a high - inflation economy, characterised by recurring cost crises and unstable economic developments, to being an economy with low, relatively stable rises in prices and wages, where the risk of periods of overheating and subsequent recessions has been reduced considerably. the journey has not been entirely problem - free, and the experiences we have gained on the way have prompted us to make some changes to practical aspects of policy, or perhaps rather as regards how policy is communicated to the public. we have also had to change and improve our analysis of inflation in different respects. i intend today to touch upon the problems we have encountered on our journey and how we have tried to deal with them. important to have explicit communication so what difficulties have we encountered as regards defining the inflation target in terms of the change in the cpi? to illustrate this i need first to say a few words about the principles that underlie the riksbank's interest rate decisions. like other central banks that have adopted inflation targeting, the riksbank has worked from the premise that monetary policy affects inflation with a certain lag ; it is generally assumed that it takes one to two years before a rate adjustment achieves its full impact on inflation. against this background, and as a step towards clarifying how we try to attain our target, we have formulated a simple rule for monetary policy : if the forecast of inflation one to two years ahead exceeds 2 per cent the repo rate should normally be raised, and if the forecast is below 2 per cent the repo rate should normally be lowered. to put it somewhat differently, but with the essence more or less the same, the rule means that monetary policy should normally be aimed at meeting the inflation target of 2 per cent cpi inflation one to two years ahead. the fact that we use primarily the inflation forecast one to two years ahead as a kind of intermediate goal for the real target of 2 per cent actual inflation means that temporary shocks that only have an impact on inflation in the coming year do not generally affect our rate setting. it is conceivable that drastic changes in interest rates could bring inflation back to the target faster than over one to two years. but such a policy would probably result in sharp, undesired fluctuations in both the real and financial economy. against this backdrop it could be said that we normally deliberately tolerate the target deviations that result from temporary