in the norwegian economy is still solid, inflation is close to the target and capacity utilisation is somewhat above a normal level. on the other hand, there is considerable uncertainty about the global growth outlook. the policy rate path reflects a trade - off between these conditions. chart : low policy rates abroad a rate of 1. 5 percent is considerably lower than the average level for the policy rate since inflation targeting was introduced in 2001. this must be viewed in the context of persistently low policy rates among norway ’ s trading partners. weighting our trading partners together, we find an expected policy rate of close to zero at the end of 2022. among some of norway ’ s main trading 1 / 9 bis central bankers'speeches partners, market rates are negative for maturities as long as ten years. despite persistently low interest rates, there are few signs of pressures in our trading partners ’ economies. although unemployment in the us, euro area and the uk has fallen steadily for several years, and to somewhat below pre - crisis levels, wage growth remains moderate and inflation is below target for a number of our neighbours. chart : unemployment and inflation in selected countries the combination of persistently low interest rates, moderate economic growth and low inflation suggests that headwinds have dampened the effect of the monetary policy measures. these conditions can be purely temporary, such as high uncertainty contributing to increased saving and low willingness to invest. but the forces at work are also of a more structural kind, rooted in demographic trends, wider income gaps and global downward pressure on wages for large groups of workers. regardless, the consequence seems to be that the interest rate level that is consistent with normal growth and inflation, ie what we refer to as the neutral interest rate, has fallen to a low level. how long this will persist is difficult to predict. but an environment in which borrowing is free and the real interest rate is considerably lower than trend growth in the economy is unlikely to be sustainable over time. chart : estimates of the neutral interest rate the neutral interest rate cannot be observed and must be estimated. in the bank ’ s monetary policy report, the current neutral real interest rate in norway is assumed to be around zero. the estimate is based on calculations from a range of different models. as we can see in the chart, these calculations show that the neutral interest rate has fallen to a historically low level close to zero over the past 20 years. with an inflation target of 2 percent, this means that setting the policy rate

and the service sector. imports are expanding at a brisk pace. there are prospects of continued strong growth in petroleum investment in 2005. employment is rising, albeit still at a moderate pace. monetary policy influences the economy with long and variable lags. there is always uncertainty surrounding inflation developments. a very high oil price may also have an impact on the krone exchange rate. historical deviations between projected and actual developments in the cpi - ate provide an illustration of the uncertainty surrounding the inflation projections. the fall in the value of the krone through 2003, low interest rates and solid growth in the real economy will gradually push up inflation. price developments in recent months have, nevertheless, increased the risk that inflation will remain low for a longer period. thank you for allowing me to make the introductory statement at this hearing.