The interest rate path we published last week showed that the key policy rate will probably be raised gradually. When households and firms perceive signals concerning future interest rate developments as credible, the impact of interest rate increases that lie ahead may occur earlier. Communication enhances the effectiveness of monetary policy Communication about the evolution of the economy is therefore an important part of Norges Bank’s monetary policy. We communicate our view of the economic situation and our monetary policy trade-offs in various ways. The Bank’s most important channel of communication is the monetary policy report. The report contains a thorough review of new information that is relevant to the evolution of the Norwegian economy and the background for the interest rate decision. Last week, the Bank launched a new product – Pengepolitikken kort fortalt [Monetary policy in brief]. [1] We believe there is a need for this. This product is designed for Norwegian readers looking for a more generalised, brief description of the background for the interest rate decision. The fundamental message conveyed is of course the same as in the Bank’s monetary policy report. Norges Bank has published forecasts for the key policy rate three to four years ahead since 2005. If the economy evolves as envisaged by Norges Bank, this is the Bank’s best forecast for future key policy rate levels. The interest rate forecast is thus a summary of the message in the monetary policy report.
Financial crises are even costlier in emerging economies than in industrialized countries, as their ability to bear such costs is severely constrained by spillovers between the banking system and sovereigns and the related vicious circle of escalating risk premia. BIS central bankers’ speeches  1  The crisis has also revealed that effective policy remedies have a transnational perspective. In the European Union the idea of a Banking Union emerged as a solution to break the above-mentioned vicious circle, thus putting a stop to financial fragmentation and helping restore the normal capital flow from the core EU countries to the periphery. In addition, the Banking Union has the merit of removing the contradiction between the pan-European nature of banking activity and keeping banking supervisory and resolution tasks at the national level. In this context, Romania’s membership in the Banking Union comes as a natural choice, given that euro area banks hold three fourths of the total assets of the Romanian banking system and two thirds of its capital. As was the case with EU membership, the national interest may be better served in the banking sector by relinquishing some of the national policy prerogatives. In the context of such a high financial integration, preserving the banking supervisory powers at national level would only entail suboptimal results, due to the limited access to information on parent banks and the lack of a cross-border perspective.