Yet we have also seen a strong and, thus far, persistent contraction in business investment, which may weigh on future productivity growth as such investment tends to raise the technology content of capital. A prolonged period of below-trend investment could also lead to an excess of savings over investment, and therefore a fall in the natural interest rate. Developments in labour supply have also been weak. One positive factor has been the increase in the labour participation rate in the euro area by around 1 pp during the crisis, whereas in the U.S. participation has fallen by more than 3 pp. However, this has to be set against an increase in euro area long-term unemployment from 3% to 6%, which creates a risk of workers’ skills being eroded and skill mismatches emerging. This is particularly  BIS central bankers’ speeches  1  relevant because unemployment is concentrated among those with lower skills: around 20% of low skilled workers are unemployed, compared with only about 7% of high skilled workers. Total factor productivity – which principally captures long-term technological progress – has fallen only marginally during the crisis, most likely reflecting the underutilised capacity in the inputs to production. However, this is no cause for comfort as TFP was on a declining trend in the euro area well before the crisis, and has recovered less quickly than in the United States.1 These developments create two interrelated challenges for policymakers. The first is how to prevent the fall in observed growth from feeding back into potential growth.
4  BIS Review 6/2004  from a presentation by Professor Lars Svensson at a conference hosted by the Federal Reserve Bank of St. Louis:9 “A recent innovation of the Bank of Norway […] is to plot the inflation forecast and the output-gap forecast in the same graph. This clearly serves to emphasize that the bank is concerned with the stability of the real economy as well as with inflation, emphasizing the flexibility in its inflation targeting.”  Transparency and communication Confidence in monetary policy makes it easier to achieve the inflation target and increases the possibility of stabilising output and employment. Transparency can contribute to strengthening confidence. Transparency makes monetary policy more predictable. In an environment where market participants understand the central bank’s response pattern, the reaction of market rates to new information about economic developments has a stabilising effect. Norges Bank wants to be open about its monetary policy work. An account of the methods we use for our inflation projections, analyses of the functioning of the economy and our professional judgment is provided in our Annual Report, Inflation Report, strategy documents, speeches and other publications. We also try to have a systematic procedure for interest rate decisions where we operate with a preannounced calendar for the monetary policy meetings. The interest rate decisions, together with a thorough explanation of the background for the decision, are published after each meeting.