output is not likely to increase as a result of this kind of immigration. access to foreign labour may nonetheless relieve shortterm bottlenecks in some sectors. in 2007, the population increased by about 55 000, with net immigration coming to 35 000. this is the highest rise in the population ever recorded. this trend seems to have continued so far this year. second, businesses in norway have become more efficient in their operations, resulting in lower costs. it has been profitable to hire more employees despite the high wage level in norway. the business sector has made use of new technology and businesses have been restructured. the many sweeping reforms of the 1980s and 1990s – the fundamental shift in the norwegian economy – resulted in more efficient markets. we are now reaping the benefits of the measures implemented then. from jon e. dølvik, t. fløtten, g. hernes and j. m. hippe ( 2007 ) : “ hamskifte – den norske modellen i endring ( fundamental shift – the norwegian model in flux ), p. 15, gyldendal norsk forlag a / s. norwegian only. third, prices for goods we import have fallen, while prices for goods we export have risen. norway ’ s terms of trade have thus improved markedly. sales of norwegian exports have been high, and we can import more goods for the goods and services sold by the business sector. lower import prices have led to low inflation and a substantial increase in employees ’ real wages. high export prices have resulted in high corporate earnings. strong economic growth has gradually resulted in high employment and shortages of labour, real capital and other resources. information from contacts in norges bank ’ s regional network indicates that capacity utilisation has remained at a high level over the past year. other indicators show that capacity utilisation continued to increase through 2007. higher demand for goods and services combined with a shortage of real resources can easily lead to higher wage and price inflation. in assessing the inflation outlook, we must therefore have a view concerning the level of available resources in the economy. we attempt to smooth fluctuations in output and employment to some extent. in order to do so, we must also judge whether output and employment are high or low. the output gap reflects our assessment of the level of capacity utilisation. in our projections, we use several methods, a broad range of information and professional judgment. we can never determine the exact level of available resources

svein gjedrem : the conduct of monetary policy introductory statement by mr svein gjedrem, governor of norges bank ( central bank of norway ), at the hearing before the standing committee on finance and economic affairs of the storting ( norwegian parliament ), oslo, 22 may 2008. please note that the text below may differ slightly from the actual presentation. the statement is based on norges bank ’ s annual report for 2007, monetary policy report 1 / 08 and the executive board ’ s assessments published after the monetary policy meeting on 23 april. * * * i would like to thank the chairman of the committee and also thank the committee for this opportunity to report on monetary policy in connection with the storting ’ s deliberations on the government ’ s credit report. my statement is based on the bank ’ s annual report, but is also updated based on the executive board ’ s assessments for the period to the previous monetary policy meeting and new information received to date. i also refer to this year ’ s report from norges bank watch, an independent group of experts that evaluates norges bank ’ s conduct of monetary policy. monetary policy in norway is oriented towards maintaining low and stable inflation. the target is annual consumer price inflation of close to 2. 5 per cent over time. the inflation target provides employers and employees with an anchor for inflation expectations among businesses and households. inflation stabilised early in the 1990s after falling from a high level in the previous decade. annual variations in inflation are now substantially smaller than they were in the 1970s and 1980s. over the past ten years, average inflation has been somewhat lower than, although fairly close to, the target of 2. 5 per cent. inflation measured by the cpi varies from month to month, primarily as a result of wide fluctuations in electricity prices, but also due to other temporary disturbances. the rise in the cpi - ate shows inflation adjusted for one - time effects of tax changes and excluding energy products. inflation, measured this way, has risen since summer 2006. one disadvantage of this indicator is that it does not only exclude the temporary effects on electricity prices of, for example, changes in the weather ; it also excludes more persistent developments in energy prices. energy prices have risen more than other prices for a fairly long period, leading to an average year - on - year rise in the cpi over the past 5 - 10 years that has been close to ½ per cent higher than the rise in the cpi -