(2016)  10  8  8  6  6  4  4  2  2  85  Weaker competitiveness  1925  10  ECONOMIC PERSPECTIVES 17 FEBRUARY 2022  1927  1928  1929  0  0 1924  1925  1926  1927  1928  1929  Source: Grytten (2008)  Source: Grytten (2008)  The events around the time of the first annual address raised issues that are still relevant today. What is the role of the central bank, and how far does it extend in normal times and at times of crisis? NORGES BANK IS BANKER TO THE BANKS The central bank’s overarching goal is to promote economic stability. That lies at the core of our mission to serve the public interest. Low and stable inflation is a precondition for economic stability. Other important preconditions are stability in the financial system and a safe and efficient payment system. The banks’ settlement system, the very core of the payment system, is operated from the central bank. Norges Bank is banker to the banks. Banks can turn to us as lender of last resort when other credit channels dry up. Norges Bank conducts continuous oversight of the financial system. When large shocks hit the economy, our workday abruptly changes. The central bank then takes on a key role in stabilising the markets. Shocks stem from various sources. In the 1920s the problem was insolvent banks. The 2008 financial crisis engulfed the entire global financial system.
Penger og Kreditt 3/05, Norges Bank. 12  In a world of free capital movements, the fixed exchange rate policy came under pressure as the 1990s wore on. For Norway, the development of the oil industry and strong growth in oil revenues also played a decisive role when formulating the new economic policy guidelines adopted in 2001: the fiscal rule for fiscal policy and an inflation target for monetary policy. NORGES BANK ECONOMIC PERSPECTIVES 17 FEBRUARY 2022  This system has served us well for more than 20 years, during a period when the economy has also been buffeted by severe shocks. But we have learned lessons along the way. One lesson is that strictly rule-bound economic policy is not fit for purpose. For interest rate setting, this means that the conduct of monetary policy must be flexible and manage trade-offs between the outlook for inflation and developments in output and employment. And the fiscal rule can no longer serve as a strict budget guideline from one year to the next. Norges Bank has faced different challenges in its 206-year history. A lot has changed since Nicolai Rygg’s day. But economic cycles will continue to shift, and we need to be prepared for new, unforeseen crises. The central bank’s primary mission remains the same: to promote economic stability and ensure confidence in the monetary system. Thank you all for your kind attention during my time as Governor of Norges Bank. Central bank governors come and go, But not the central bank, as you well know.