com / templates / page. aspx? id = 15814. reference is made in particular to archer, d. ( 2005 ) : “ central - bank communication and the publication of interest rate projections ”, faust, j. and e. leeper ( 2005 ) : “ forecasts and inflation reports : an evaluation ”, svensson, l. e. o. ( 2005 ) : ” further developments of inflation targeting " and woodford, m. ( 2005 ) : “ central - bank communication and policy effectiveness ". this is further discussed by woodford, m. ( 2005 ) : “ central - bank communication and policy effectiveness ", see footnote 2. if the bank ’ s interest rate forecast is different from market expectations, then this is useful information, not only for market participants, but also for the central bank. this may indicate that the central bank and market participants have a differing perception of future economic developments. it may also reflect differing views concerning the trade - offs in monetary policy. market expectations, as reflected in forward rates, will be a way of cross - checking the bank ’ s interest rate forecast. if norges bank ’ s interest rate forecast deviates from market expectations, the bank should be able to explain this satisfactorily in order to influence interest rates in the money market. in inflation report 3 / 05, there were only minor differences between norges bank ’ s interest rate path and calculated forward rates up to 2007. forward rates indicated that interest rates would then level off, while our forecast indicated a continued gradual rise up towards a more normal level. after the publication of the report and up to end - january, market expectations have fallen. this shows that the interest rate path envisaged by the bank and the path expected by the market can differ. there may be several reasons for this. calculated forward rates will usually reflect market expectations concerning the future interest rate path. market interest rates may, however, be influenced by extraordinary supply and demand factors that do not have a bearing on the outlook for underlying economic developments or monetary policy. but market participants may also have a different perception of the interest rate path that is required to stabilise inflation at target. the difference can also be ascribed to the downward pressure exerted on long - term interest rates in many countries by extraordinary conditions in international capital flows. possible challenges of an explicit forecast of future interest rates to what extent a central bank should publish an interest rate forecast has been the subject of

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 -