the interest rate should normally be changed gradually so that we can assess the effects of interest rate changes and other new information. thus, we started increasing the key rate from a low level of 1. 75 per cent last summer. thereafter, the interest rate has been increased in small increments of 25 basis points to 2. 5 per cent. interest rate policy must also be assessed in the light of developments in property prices and credit. a build - up of financial imbalances may influence future inflation and output. in recent years, house prices and household debt have increased sharply in several countries and in our country as well. growth in housing investment moved up further in 2005 from the record - high level in 2004. a gradual normalisation of the interest rate level and a larger supply of new dwellings are expected to curb the rise in resale home prices in the years ahead. the question of whether financial stability considerations should be explicitly included in monetary policy is a subject of widespread debate, both in academia and within central banks. the answers diverge and international consensus has not yet been reached. a flexible inflation targeting regime provides scope for taking into account the impact of potential financial imbalances on future inflation and output. asset prices and household credit and debt are inputs for the analysis of future developments in inflation and the output gap. in this way, the assessment of asset prices and debt levels may influence interest rate policy. furthermore, it is important to keep in mind that the unwinding of financial imbalances may lie many years ahead, well beyond the horizon for the inflation target. it is questionable whether monetary policy today should respond to potential repercussions of possible financial imbalances well beyond the monetary policy horizon. first, it is well documented that asset price bubbles and financial imbalances are very difficult to identify ex ante. second, the appropriate timing of a proactive monetary response is likely to be difficult to determine, given the lags in the impact of monetary policy. third, even in the case where the central bank knew that financial imbalances were building up, the size of the interest rate rise needed to reduce the imbalances might be so large that it could lead to a severe economic downturn. in norway, the central bank is one of the institutions with responsibility for analysing and monitoring the financial system. as a flexible inflation - targeting country, we have chosen to incorporate financial stability considerations into the monetary policy decision - making process, partly because asset prices and

, as did bank shares and real estate funds with investments in the city of london or in the rest of the uk. in addition, country rating adaptations did not come out of the blue. the euro stoxx 50 displayed heightened volatility as the referendum day approached, but remained range - bound between market tensions earlier this year and in august of last year. stock prices dropped sharply on the day after the referendum ; however, the situation had already calmed down by the afternoon. a closer look reveals that shares of many financial institutions have dropped strongly since the referendum, and valuations still remain significantly lower than shares of non - financial die zeit, 7 july 2016, no 29, p. 37. bis central bankers ’ speeches sectors – not just in the uk but also in the rest of the euro area. this is a sign that other, more deeply rooted structural problems prevail in the european banking sector. i will touch upon one of these issues later on in my speech. however, most banks had taken the possibility of a brexit sufficiently seriously and therefore made careful preparations. supervisors had asked them to assess the risks associated with their holdings of stocks, bonds and foreign currency in good time. as such, banks were forced to make contingency plans. thanks to stricter capital and liquidity regulations, banks are in considerably better shape today than at the outset of the global financial crisis in 2007. in this context, i wish to pay tribute to the professional approach of the bank of england before and after the referendum – which demonstrated excellent preparation as well as execution on its part. the ecb and other central banks, too, declared that they would stand ready to supply liquidity should the need arise. however, up to now, no provision of additional liquidity has been necessary. all of the actions taken have certainly helped to ward off stronger financial market reactions. but this doesn ’ t necessarily imply that the financial markets have already found their new equilibrium. nobody can rule out further movements in prices or shifts of funds from one asset class to another. nevertheless, one can be cautiously optimistic that – regarding the financial markets – a panic reaction to brexit is rather unlikely at present. indisputably, it is to a large extent the united kingdom that will have to bear the consequences of the referendum. consumer confidence declined rapidly. already in may, the bank of england expected uk gdp growth to slow down to 2 percent in 2016 2 as a result of heightened uncertainty – new