norwegian economy. employment is rapidly rising and unemployment has exhibited a marked decline. there are signs of higher wage growth and expectations of rising inflation. at the same time, the krone exchange rate has depreciated from strong values. • the interest rate path presented in inflation report 3 / 06 will provide a reasonable balance between the objective of bringing up inflation towards target and the objective of stabilising developments in output and employment, conditional on the information currently available to norges bank. • monetary policy influences the economy with a lag. over several years, interest rates have been considerably lower than what norges bank considers to be a neutral level. the interest rate may gradually be raised to a more normal level at a somewhat faster pace than envisaged earlier, although it is unlikely that rates will be raised at every monetary policy meeting. based on norges bank ’ s current assessment, the interest rate will thus continue to be raised in small, not too frequent steps if economic developments are broadly in line with projections. • the sight deposit rate should be in the interval 3¼ - 4¼ per cent in the period to the publication of the next inflation report on 15 march 2007, conditional on economic developments that are broadly in line with the projections. new information may reveal aspects of economic developments that indicate that the norwegian economy is moving on a different path than projected. on the one hand, major shifts in trade patterns, strong competition, weaker global growth or a stronger krone exchange rate may result in low inflation. on the other hand, low real interest rates or a further depreciation of the krone may lead to a higher - than - projected rise in output and inflation. projections are uncertain. disturbances in the economy will affect interest rate developments. this reduces the uncertainty about developments in prices and output. monetary policy cannot fine - tune economic developments, but it can prevent the largest effects from occurring when the economy is exposed to disturbances. in some situations, it may be appropriate to guard against particularly adverse developments. in the baseline scenario, the interest rate is gradually raised to a more normal level. norges bank continuously assesses the effects of interest rate changes and other new information concerning economic developments. thank you for your attention.

siden 1900 ( the norwegian credit market since 1900 ) samfunnsøkonomiske studier no. 19, statistics norway, oslo. see also mykland, knut ( ed. ) cappelens norgeshistorie, vol. 13 page 86. for further discussion of parity policy and norges bank ’ s role, see ecklund, gunhild j. ( 2008 ), pages 46 - 51 and 67 - 71 : “ creating a new role for an old central bank : the bank of norway 1945 - 1954 ”, series of dissertations 2 / 2008, bi norwegian school of management, oslo. this link to gold was not as strong as when the obligation to redeem in gold applied. under the bretton woods system, countries whose public finances were in disequilibrium, or who allowed inflation to rise for other reasons, had to let their exchange rate depreciate against the dollar. when the exchange rate against the dollar fell, the value of money measured in gold decreased. the post - war period was marked by the strong conviction that the economy could be finetuned by the coordinated use of instruments decided at a centralised level. the value of the krone was pegged to the dollar and to gold while a policy of low interest rates was accompanied by an ample credit supply. this was possible in a highly regulated economy. the positive attitude to regulation probably stemmed from the period of rationing and centralised government during world war ii. the system had functioned reasonably well and a regulatory apparatus was already in place. 21 internationally, there was widespread desire to stabilise economic developments, originating in theories published by john maynard keynes in the early 1930s. this was part of the background for norwegian politicians ’ ambition to fine - tune the economy in norway. the works of a. w. phillips 22, published in 1958, also supported this view. according to phillips, a country could apparently choose between low unemployment and low inflation. this menu option is often referred to as the phillips curve. and what kind of “ option ” was that? unemployment is real, while inflation is only changes in an index! by formulating the question in this way, the choice was obvious. this analysis had a considerable impact on economic policy. the global economic situation became difficult into the 1970s, with low growth and high inflation in norway and other countries. the us and european authorities opted to pursue an active counter - cyclical policy rather than combat