In effect, MAS front-loaded policy adjustment in Jan so that further adjustment was not necessary in Apr 27. Shift in monetary policy stance in Jan was measured: continuing to keep $ band on gradual and modest appreciation path to ensure price stability over medium term. Important to keep a medium-term orientation with regard to setting monetary policy 28. If MAS reacted to every short-term fluctuation in output and prices, it would risk introducing even more volatility to markets and economy. This is because: •  4  External shocks that could hit small open economy like ours can be very frequent  BIS central bankers’ speeches  •  There are considerable lags in monetary policy transmission. Off-cycle policy shift therefore highly atypical and only sparingly used. 29. Current policy stance remains appropriate for ensuring medium-term price stability  •  Economy estimated to be close to its potential for 2015. •  Labour market expected to remain at full employment  •  Core inflation, most relevant indicator for MAS’ monetary policy, expected to strengthen. Next monetary policy review is as scheduled in Oct. MAS’ financial performance 30. MAS’ P/L was almost in balance in FY2014/15, recording a small profit of $ billion. •  In FY2013/14, we recorded a profit of $ billion. •  Prior to that in FY2012/2013, recorded a loss of $ billion. 31. Why so volatile? Fluctuations in MAS’ profit figures from year to year is almost entirely due to currency translation effects, i.e.
This may have limited the demand for new labour. This trend has now been reversed. Employment growth measured by number employed is strong. Our regional network reports that there are labour shortages in many sectors. The wage settlements concluded so far indicate that wage growth may, as expected, be somewhat stronger this year than in 2005. Historically, it has proven difficult in both local and central negotiations to keep down cost growth when unemployment is low. There is thus a risk of even higher wage growth further ahead. On the other hand, the threat of relocation of jobs, increased labour inflows and higher imports of services from low-cost countries will probably contribute to restraining wage growth. In the period 1998-2002, businesses and employees experienced that high wage growth resulted in high interest rates and wide fluctuations in the krone exchange rate. This insight is perhaps still marking wage negotiations. The phase with ample labour supply may be in the process of tapering off. The decline in sickness absence has been reversed, and is now increasing. As was the case earlier, the number of persons on disability benefits is rising. The supply of labour from other countries is important for many industries, but on the whole is no longer offsetting increased flows into benefit schemes. There is competition for highly skilled labour in the new EU accession countries. Labour flows into the UK and Ireland have been particularly high and labour barriers may be more restrictive in Norway than in the UK and Ireland.