Øystein Olsen: The conduct of monetary policy Introductory statement by Mr Øystein Olsen, 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, 9 May 2019. * * * Accompanying slides of the speech. Please note that the text below may differ from the actual presentation. Thank you for this opportunity to report on the conduct of monetary policy. My introduction here today is based on Norges Bank’s Annual Report for 2018 and our monetary policy assessments up to the monetary policy meeting yesterday. Since 2001, the main objective of monetary policy in Norway has been low and stable inflation. In March 2018, a new Monetary Policy Regulation was laid down. The inflation target was lowered from 2.5 to 2 percent. At the same time, the Regulation specified that inflation targeting shall be forward-looking and flexible so that it can contribute to high and stable output and employment and to counteracting the build-up of financial imbalances. When I stood here about a year ago, I concluded that the outlook for the Norwegian economy was bright. We were emerging from the downturn that followed in the wake of the oil price decline in 2014. Growth was again on a firm footing and unemployment had declined. There were prospects that the policy rate would shortly be raised. I emphasised that this was a good sign.
Policy configuration will need to be pragmatic and premised on the risk that is being managed. Indeed, macroprudential policies have been found to be effective in managing financial cycles and associated risks, such as excessive credit growth and asset price inflation. Nevertheless, sizeable shifts in capital flows could cause disorderly financial market conditions and excessive exchange rate movements. In pursuit of preserving stability, policymakers must therefore be able to avail ourselves to a broad range of policy toolkit. Globalisation of Human Capital Lastly, I will briefly touch on what globalisation means for the average person in today’s economy. Being skilled alone is no longer a guarantee of employment. With offshoring of jobs, workers are now competing in a fluid workplace, against a global workforce. A job that is available locally today can be effortlessly transferred to a different country tomorrow. Essentially, the increasingly dynamic nature of work underscores the importance for workers to constantly adapt, re-skill and up-skill. A global workforce also means that borders no longer limit the search for preferred jobs. In fact, globally, 258 million people, almost the size of Indonesia’s entire population, are living in a country that is not of their origin. Another aspect is the intensification of globalisation of information. Technology has brought the world into the palm of our hands. Last year, 3 in every 4 persons were active on a social media platform. In fact, if Facebook were a country, with 1.5 billion active users, it would be the largest country in the world today.