provide an assessment of this. the same applies should special emphasis be placed on developments in financial markets and property markets. today's inflation rate is partly the result of the interest rate that was set one to two years ago. current inflation figures do not provide an adequate basis for determining the level at which interest rates should be set today. monthly figures for the consumer price index are also influenced by random and temporary factors that have little impact on developments in inflation over time. precipitation levels have an effect on electricity prices. changes in indirect taxes have an immediate impact on the consumer price index. the direct effects of these factors on inflation are exhausted after a year. hence these factors do not have any implications for the interest rate, which is normally set with a view to maintaining inflation at 2½ per cent two years ahead. however, it is still interesting to adjust monthly inflation figures for temporary effects to determine whether developments are broadly in line with our projections. this is why norges bank presents figures for consumer price inflation where the effects of some temporary factors are excluded. however, the automatic adjustment of inflation figures for direct effects of one - off factors can also be associated with pitfalls. higher indirect taxes and electricity prices can be a source of accelerating inflation via spillover effects on other prices and wages. the mandate for monetary policy with an inflation target provides a sound basis for assessing norges bank's interest rate setting. inflation at one point in time, adjusted for certain temporary effects, provides a measure of whether interest rate setting was appropriate. market participants and others can assess the quality in the inflation reports and analyses published by the bank, and whether our analyses are consistent with our interest rate setting. the uncertainty associated with economic developments and inflation, as observed since the mid - 1990s, may indicate that we normally reach the inflation target within an interval of + / - 1 percentage point. the government has assigned a task to norges bank. norges bank uses its professional judgement in a delimited area. the results of our decisions can be measured. hence the government authorities can evaluate our performance. the interest rate differential against other countries has widened central banks in several countries have reduced interest rates earlier this year with a view to countering an economic turnaround. the federal reserve has cut the federal funds target rate by a total of 2½ percentage points since the beginning of the year. the bank of england and the european central bank have recently cut rates. there is a also a tendency towards a more expansionary fiscal stance

is solid in countries like france, finland and ireland. germany has a large internationally exposed industrial sector, which is feeling the effects of the slowdown in growth in the us and asia. in a survey, growth forecasts for germany have been revised downwards this year from 3 per cent a few months ago to a good 2 per cent. economic growth prospects for sweden and the uk are also weaker than a few months ago. however, the easing of monetary and fiscal policy in many countries should contribute to a pick - up in growth and reduce the risk of a pronounced international downturn. the norwegian economy will be particularly hard hit by an international downturn if this translates into a sharp fall in oil prices and other commodity prices that are important for norwegian exports. this would lead to lower export revenues and slower growth. employment would also be affected. an international downturn would also lead to lower prices for imported goods and services and thereby reduce domestic inflation. if other nordic countries are negatively affected, this will have an impact on the supply of labour in norway since the nordic labour market has become increasingly integrated. continued pressures in the norwegian economy consensus forecasts. available labour resources are limited in the norwegian economy. the labour force participation rate is high. vacancies are numerous, particularly in the health sector, schools and the construction industry due to a shortage of teachers, nurses, dentists and construction workers. extensive use of disability and sickness benefits is limiting the supply of labour. reforms such as contractual pension schemes, which were stepped up through the 1990s, cash allowances for families with small children and an increased number of vacation days this year and next also contribute to reducing the effective labour supply. the country as a whole is experiencing labour shortages, but the differences between regions and industries are considerable. in eastern norway, where service industries are very important, unemployment has declined the last year. from 1998 to 2000 alone, employment in private services rose by 26 000 nationwide. in southern and western norway, unemployment rose last year, largely reflecting the decline in manufacturing employment since the beginning of 1999. unemployment has declined again recently. employment in the public sector has also increased markedly in recent years. over the last 30 years, the public sector and private services have laid claim to an increasing share of labour resources in norway, a trend that will probably continue. the tight labour market reflects a high activity level in the norwegian economy. the mainland economy is experiencing an upturn, but growth is low. growth in private consumption has been moderate the