Norwegian banks and mortgage companies are now also entitled to issue mortgage-backed bonds. The rules for covered bonds entered into force on 1 June 2007. Norwegian covered bonds are very different from US CDOs backed by subprime mortgages. The regulations ensure that Norwegian covered bonds are a more transparent and substantially more secure investment alternative. Norwegian mortgages have a maximum loan-to-value ratio of 75 per cent. In addition, all holders of covered bonds have the same claim over the cover pool. A number of conclusions can be drawn from the turmoil in credit and money markets. Problems in markets far beyond Norway’s borders may have an impact on Norwegian banks even if the banks are not directly involved. As a result of the globalisation of financial markets and new and complex instruments, turbulence spreads quickly. Banks extend long-term loans. They should therefore be cautious about basing borrowing growth on short-term financing. They should ensure access to a solid local deposit base or long-term bond issues for any expansion. BIS Review 115/2007  9  When times are good, it may be difficult to perceive and assess risk. New products that are dependent on favourable economic developments are not viable. New products must be robust to slowdowns and unforeseen events. The housing market in Norway and the financial position of households The recent turbulence originated in the US housing market. It may be interesting to compare with developments in the housing market in Norway and in household saving and investment decisions.
Inflation Indications and Implications I'll start by saying that although we are seeing some signs that inflation is moderating, it remains far too high, and it is my No. 1 concern going into 2023. Rapidly rising prices continue to have an immense impact on families and businesses, especially when it comes to essentials like food, utilities, and housing. High inflation is a new reality for many people. For the three decades preceding the pandemic, the inflation rate averaged almost exactly 2 percent, as measured by the personal consumption expenditures (PCE) price index. But that changed dramatically in the spring of 2021, when inflation suddenly soared, ultimately reaching a 40-year high of 7 percent last June. While the inflation rate has since come down to 5-1/2 percent, it's still higher than any pre-pandemic reading since 1982 and far above the FOMC's 2 percent longer-run goal. Persistently high inflation undermines the ability of our economy to perform at its full potential, so it is critical for the Federal Reserve to bring inflation back down to our goal . We are firmly committed to doing so. 1/4  BIS - Central bankers' speeches  Shifts and Realignment Those who have been following my speeches lately will know that I've been quite devoted to a recurring theme: using the layers of an onion to describe inflation.1 But with the new year, I thought I would switch gears. I didn't have to look too far, because the mechanism of shifting gears is exactly what's going on in the economy.