source and nature of the disturbances and their expected persistence. it also depends on whether energy price shocks fuel inflation via second - round effects on other prices and wages, for instance through inflation expectations. failing to respond to secondround effects, we may risk persistent overshoots of our inflation target and ultimately, a deanchoring of inflation expectations. on the other hand, wrongly interpreting temporary movements in energy prices as persistent, we could have larger output losses in the short term and may even increase inflation volatility. moreover, changes in relative prices, for instance due to higher carbon prices, are effective signals that push the transition in the right direction. an appropriately flexible and forward - looking monetary policy would help those necessary changes in relative prices to feed through. but flexibility must not come at the expense of a loss of credibility. in periods of structural change and large uncertainties, such as those created by climate change, well - anchored inflation expectations remain as important as ever. references aastveit, k. a., bjørnland, h. c., & cross, j. l. ( 2023 ), “ inflation expectations and the pass - through of oil prices ”, the review of economics and statistics, 105 ( 3 ), 733 – 743. aastveit, k. a., bjørnland, h. c., & thorsrud, l. a. ( 2015 ), “ what drives oil prices? emerging versus developed economies ”, journal of applied econometrics, 30 ( 7 ), 1013 – 1028. auclert, a., monnery, h., rognlie, m., & straub, l. ( 2023 ), ” managing an energy shock : fiscal and monetary policy ”, unpublished manuscript. baumeister, c., & hamilton, j. d. ( 2019 ), “ structural interpretation of vector autoregressions with incomplete identification : revisiting the role of oil supply and demand shocks », american economic review, 109 ( 5 ), 1873 - 1910. bjørnland, h. c., larsen, v. h., & maih, j. ( 2018 ), “ oil and macroeconomic ( in ) stability ”, american economic journal : macroeconomics, 10 ( 4 ), 128 – 151. bloom, n. ( 2009 ), “ the impact of uncertainty shocks ”

with a debt of nok 2 million even after the interest rate has increased by 3 percentage points. the household with the lowest income will have a tight margin. principal payments will have to be deferred and, even with a deferral of a few years, this household will have little leeway after basic expenses have been paid. in order to increase its financial leeway, it will either have to increase its income, or reduce housing consumption and dispose of its debt. both households will be vulnerable should one member lose income from employment and have to rely on benefits. with an income loss of 10 per cent, even the household with the highest income level would have to make considerable spending adjustments. although these households have higherthan - average debt, this debt level is not uncommon. based on the analyses in inflation report 3 / 05 and the assessments provided in the press release following norges bank ’ s monetary policy meeting on 25 january 2006. however, for most households, it will be relatively easy to cope with gradually higher interest expenses. the outlook for the norwegian economy is favourable. output has picked up, although so far not to such a degree that there are visible signs of inflation. as long as the rise in prices is slow, it will be appropriate to maintain a low interest rate. but when capacity utilisation increases, the interest rate will have to be raised gradually towards a more normal level. even though price inflation has deviated from the target for a period, there are no indications that economic agents have changed their view of future inflation. expectations are stable. when households and businesses make their saving and investment decisions and set prices, they can safely ignore the possibility of sustained, marked increases or decreases in the general price level. the business sector can base their decisions on the assumption that wage and cost inflation will not revert to the level seen in the 1970s and 1980s. employees also know that their pay increases will not be eroded by inflation. low and stable inflation is a credible objective. 4. are we equipped for the future? norwegian enterprises have access to new markets and are encountering increasing competition. new businesses are emerging while others are scaling back and closing down. we have behind us 15 - 20 years of fairly sound macroeconomic management, which provides a good basis for growth in the norwegian economy. the banking system and securities markets are highly developed. generally, only unprofitable projects lack financing and capital. in a take - over, new owners completely re - haul poorly run