ida wolden bache : policy rate will likely be reduced in march introductory statement by ms ida wolden bache, governor of norges bank ( central bank of norway ), at the press conference following norway's announcement of the policy rate, oslo, 23 january 2025. * * * presentation accompanying the speech chart 1 : policy rate kept unchanged at 4. 5 percent norges bank's monetary policy and financial stability committee has decided to keep the policy rate unchanged at 4. 5 percent. norges bank is tasked with keeping 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. we have raised the policy rate significantly to tackle high inflation. since december 2023, the policy rate has been held at 4. 5 percent. the interest rate has contributed to cooling down the economy and to dampening inflation. the current outlook suggests that inflation will return to target without a large increase in unemployment. inflation fell further towards the end of last year and has moved closer to target. at the same time, the rapid rise in business costs is likely to contribute to stoking inflation ahead. the committee is concerned with the risk that if the policy rate is lowered too quickly, inflation could remain above target for too long. on the other hand, the committee does not want to restrain the economy more than needed to stabilise inflation around 2 percent. the committee judges that a restrictive monetary policy is still needed, but that the time to begin easing monetary policy is soon approaching. if developments turn out as we now envisage, the committee will reduce the policy rate in march. we have not made new forecasts for this monetary policy meeting but have assessed new information about economic developments against the forecasts presented in december. chart 2 : unemployment is little changed growth in the norwegian economy picked up slightly in 2024. activity has been lifted by high public demand and large investments in the petroleum industry. at the same time, housing construction has shown a sharp decline. unemployment has risen somewhat from a low level in recent years. in recent months, unemployment has changed little in line with our december projections. chart 3 : inflation has moved closer to target 1 / 2 bis - central bankers'speeches inflation has fallen markedly over the past year, and in december inflation stood at 2. 2 percent and was lower than expected. however, excluding energy prices, which fluctuate widely,

’ s unhappy families – if they ’ re not unique, they ’ ve each of them had their own particular characteristics. no two of the things in bernanke ’ s list, under the general heading of “ supply - side elements ”, would have identical effects. the same goes for the particular shocks we ’ ve experienced over the past few years. and that makes their consequences harder to discern, harder still to forecast. ( in this analogy, i suppose the more plain - vanilla demand disturbances would play the part of the more uniform, happy families. ) none of that means we shouldn ’ t do everything in our power to increase our understanding of these things. bernanke ’ s points – indeed all his recommendations – are extremely well made and i fully expect the bank ( and indeed other central banks ) to respond positively to them. equally, i suspect that, were these supply - side disturbances to continue, on anything like the scale we ’ ve seen over the past decade, we would have to live with a higher degree of uncertainty about the future ; and that, in turn, has various consequences for the behaviour of monetary policy and economic forecasts. first, as regards policy, we ’ d be unlikely to see a return to the halcyon days of the nice decade, during which interest rates seemed to respond exclusively to economic growth. we should instead expect a continuation of the more recent pattern, in which policy has had to respond to a variety of more lagging indicators, including slack in the labour market and those relating to domestic inflation. ( i explained in a talk last year why this an appropriate response to uncertainty about the supply side – see broadbent, 2023. ) second, hand - in - hand with greater volatility and uncertainty go larger forecast misses. these are uncomfortable but if the world is genuinely a noisier place, they ’ re also inevitable. i was struck, in this respect, by a graph the governor used in his opening remarks for the latest monetary policy report press conference ( reproduced here as chart 9 ). it shows how inflation has turned out against various vintages of short - term mpc forecasts – in particular, how wide of the mark those projections were in 2022 and, equally, how small the misses have been in recent months. it ’ s unlikely this is because the mpc has suddenly become brilliant at forecasting ( or that it was useless before [ 5 ] ). it ’ s simply because there have been