sector remains extensive, but the management of ownership has been completely changed. a number of markets in which the state used to be the sole owner have been opened up to the private sector. the competition in the power and telecom markets and in aviation and broadcasting that you would regard as a matter of course today did not emerge until the 1980s. state - owned companies were listed on the stock exchange and unprofitable enterprises are no longer kept artificially afloat. norwegian businesses also face increasing global competition. international agreements, through our close collaboration with the eu and through the world trade organisation, have provided for freer flows of labour, goods, services and capital in and out of the country. last but not least, rules and principles for economic policy were introduced in norway, as in other countries, to prevent policy decisions based on shorter - term considerations and shifting preferences. the norwegian economist finn kydland, who is from my home district of rogaland, received the nobel prize in economics for his study showing that economic performance can be improved if policymakers can commit to a pre - established set of credible policy rules. 7 four pillars were established in the 1990s and in 2001 to stabilise economic developments : • the petroleum fund mechanism • the fiscal rule • a floating exchange rate • inflation targeting this system was introduced in response to the sharp upturns and downturns in the economy over the first twenty years of the norwegian oil age. as a result of the petroleum fund mechanism, a greater share of government petroleum revenues is invested abroad. this curbs the impact of oil price fluctuations on demand and output – as well as on inflation and the exchange rate. the rules for the investment of these oil revenues prevent individuals or groups from gaining strong control over norway ’ s oil wealth. the fiscal rule for the central government budget states that petroleum revenue spending shall be limited to the return on the funds invested abroad. this provides for a gradual phasing - in of oil revenues and a rate of spending that can be sustained for several generations. the fiscal rule is a binding commitment policymakers have imposed on themselves and is intended to foster long - termism and predictability in fiscal policy. norway ’ s floating currency, which normally appreciates in good times and depreciates in bad times, also has a stabilising effect. the advantage of this effect is most evident when economic developments are weak. for example, many southern european countries that have adopted the euro are currently facing considerable challenges. to

inflation is that our job is also to contribute to keeping as many people in employment as possible. we do not want to restrain the economy more than that required to tame inflation. many people are now worried about trying to make ends meet. borrowers are facing higher interest rates on top of high inflation. many families are facing tighter budgets, which will be hard for some groups. but by raising the policy rate, we are helping to bring down inflation. norges bank economic perspectives 2023 the road ahead the past few years have reminded us that price stability cannot be taken for granted. we have also been reminded that events that constrain the supply of goods and services can have a substantial impact on prices. we must be prepared for potential threats to price stability in future too. some of the driving forces that kept inflation low in the decades up to the pandemic may be going into reverse. globalisation has been met with growing opposition. already before the pandemic, new trade barriers were erected – often to promote a country ’ s own economy. the pandemic and russia ’ s invasion of ukraine have demonstrated that long global value chains and trade in strategically important goods make us vulnerable. lower trade globally and measures to build more robust supply chains could lead to lower productivity and higher prices. demographic trends are also shifting. in many countries, the working population is on the decline. this can reduce the supply - side flexibility of the world economy. combined, these shifts can make the job of keeping inflation low more demanding. how this will play out is highly uncertain. but there is one thing i am certain about. the global economy must make an absolutely necessary transition to a low - carbon economy. there are evermore signals of the urgency to achieve that transition. the number and intensity of heat waves, floods and droughts are on the rise. the transition is fraught with uncertainty and proceeding too slowly. for each year the transition is too slow, the more likely it becomes that stronger and more costly measures will be needed later on. to reach the targets, governments have a range of instruments at their disposal. carbon pricing is particulary effective in that it sends a clear message as to what we should do less of and what we need more of. the rising costs of emissions is one of the main drivers behind today ’ s investments in renewable energy and more energy efficiency solutions ( chart 9 ). we can see that price mechanisms work. chart 9 transition to a low - carbon economy carbon price in