The interest rate set by central banks is normally a very short-term interest rate, which in itself has negligible effects on economic decisions. It is mainly expectations about future policy rates that affect market interest rates and thus economic decisions. Most central banks communicate future policy intentions in one way or another. The majority of central banks communicate indirectly through forecasts based on technical interest rate assumptions, and by giving verbal signals about future interest rate decisions in policy statements and speeches. With such indirect communication, the market participants gain information about the sign of future interest rate decisions, but may have less information about the size. Until November 2005, Norges Bank used technical interest rate assumptions in the inflation forecasts, but also on some occasions commented on whether the Bank intended to follow a different policy than what seemed to be reflected in market interest rates. Thus, the Bank gave signals about the sign of future policy intentions relative to market expectations, but not on the size. 3 From November 2005, Norges Bank started to use endogenous interest rate forecasts in the Monetary Policy Report. Norges Bank was the  1  This process has also been acknowledged by the Norwegian parliament: “The majority think that it is a prerequisite for an effective monetary policy that the central bank is open about the interest rate forecasts, and are satisfied with the fact that Norges Bank emphasises this.” (Innstilling frå finanskomiteen om Kredittmeldinga 2007, Innst.S.nr.274, s.11.
On the one hand, European economies are in recession, the US economy has been struggling to return to the path of growth, and more recently, fast-growing economies such as Brazil, India, China, Turkey have also slowed down. In such circumstances, it would be logical for the prices on the commodity exchanges worldwide to fall. But it is not happening. Prices of oil and basic agricultural products are not falling, but maintain the previously achieved high level or even continue to rise. In part, this is due to the overly relaxed monetary policy of the Fed, the ECB and the Bank of England, as well as the debt crisis in the Euro area, which “urge” investors to invest in real goods on the commodity exchanges. The rest is a consequence of the so-called supply shocks, i.e. political tensions in the Arab world and the Middle East, as well as the drought in the countries that are the largest producers of grain. In such conditions, despite the slowdown of economic growth, Macedonia is facing a higher imported inflation. In conditions of such an emphasized economic crisis, how will the monetary policy be put into operation to encourage economic growth? You claim that the NBRM can contribute only by keeping price stability, but obviously it is undermined. Price stability is neither undermined nor will it be. In August and September, a higher than usual monthly price increase for this time of the year was registered, due to one-off factors that I have already explained.