normal for inflation not only has no theoretical or empirical support, but entails the moral hazard of policy inaction in dealing with supply constraints. not a sufficient condition because there is no empirical evidence to establish that the benefits of higher growth outweigh the costs of welfare loss associated with higher inflation. 55. key to our collective national aspiration for sustained high economic growth is low and steady inflation. it is only under such an environment of price stability that investors and consumers can make informed choices and contribute to growth. the responsibility of the reserve bank in this regard is to anchor inflation expectations and ensure price stability. neither theory nor empirical evidence presents a credible case for acquiescing in a new normal for inflation in india. bis central bankers ’ speeches

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