have fallen further. low interest rates abroad influence the krone and thereby the prospects for inflation, contributing to low interest rates also in norway. in december last year, norges bank cut the key policy rate by 0. 25 percentage point to 1. 25 percent. in our assessment, norges bank gave weight to the weakening of the growth outlook for the norwegian economy and attached importance to countering the risk of a pronounced downturn due to lower oil prices. last week, norges bank presented its latest monetary policy report with updated projections for developments in the norwegian economy and a new assessment of the orientation of monetary policy. developments in the norwegian economy this winter have been broadly in line with expectations. inflation remains close to 2. 5 percent and unemployment has remained stable. so far, the effects of the fall in oil prices on the real economy have been relatively small. however, the outlook for the norwegian economy has weakened somewhat. oil prices have continued to fall and activity in the petroleum industry appears to be declining more than previously assumed. wage growth in 2014 was lower than projected and there are prospects that wage growth will also be lower ahead than projected earlier. this will lead to lower inflation further ahead. at the same time, house prices continue to rise rapidly. this may increase household vulnerability and may trigger or amplify an economic downturn further ahead. the executive board decided to keep the key policy rate unchanged at 1. 25 percent. if developments in the economy ahead prove to be broadly as projected, there are prospects that the key policy rate will be lowered. bis central bankers ’ speeches the analysis in the report suggests a key policy rate of approximately 1 percent in the coming years, followed by a gradual increase. the analysis suggests that inflation will increase somewhat in the coming quarters before edging down and lie slightly above 2 percent later in the projection period. capacity utilisation in the mainland economy is projected to decline further, before returning to a more normal level. let me summarise. after the global financial crisis, the norwegian economy quickly rebounded, supported by robust public finances and strong growth in the petroleum sector. since last summer, oil prices have fallen. activity in the petroleum sector has probably passed the peak. so far, the impact on the real economy has been modest. at the same time, the norwegian economy is facing new challenges. vulnerabilities established during the golden years must be addressed. from being in a unique economic position, norway is now headed for a period of restructuring

øystein olsen : the conduct of monetary policy introductory statement by mr øystein olsen, governor of norges bank ( central bank of norway ), at the hearing before the standing committee on finance and economic affairs of the storting ( norwegian parliament ), oslo, 19 may 2016. * * * please note that the text below may differ from the actual presentation. thank you for the opportunity to report on the conduct of monetary policy. my introduction here today is based on norges bank ’ s annual report for 2015 and our monetary policy assessments up to the monetary policy meeting last week. chart : inflation monetary policy in norway has since 2001 been oriented towards keeping inflation low and stable. the operational target is consumer price inflation of close to 2. 5 percent over time. over the past 15 years, inflation has averaged around 2 percent. this is close to the target. norges bank operates a flexible inflation targeting regime, giving weight in our interest rate setting to developments in output and employment as well as inflation. the effects of monetary policy are uncertain. this normally suggests proceeding with caution. as monetary policy also seeks to be robust and take account of the risk of particularly adverse outcomes for the economy, the tasks of monetary policy should include contributing towards mitigating the risk of a build - up of financial imbalances. over the past year, monetary policy in norway has to a great extent been influenced by weaker economic growth, resulting from the fall in oil prices and lower activity in the petroleum industry. to counteract the decline, the key policy rate has been reduced by a total of 1 percentage point since december 2014. the key policy rate is now 0. 5 percent. a small open economy such as norway is also influenced by the world around us. norway ’ s low interest rate level is largely a consequence of low interest rates abroad. chart : global growth projections growth in the global economy has been low in recent years, partly reflecting long - term trends such as lower productivity growth and demographic changes. long - term interest rates abroad have shown a falling trend since the 1980s. over the past few years, the repercussions of the financial crisis and the need for deleveraging in many countries have weighed on growth. while the moderate recovery in advanced economies continued last year, growth in china and other emerging economies slowed. in its april world economic outlook report, the international monetary fund ( imf ) revised down its global growth forecasts yet again. at the same time, the imf