At present - with continued low interest rates abroad and a close link between domestic interest rates and the krone - a tighter monetary policy would restrain credit demand primarily because job security would be reduced as a result of a stronger krone. House prices and developments in household credit influence consumption and housing investment. We seek to take account of these indirect effects in interest-rate setting. A turnaround has occurred in the Norwegian economy. The economy has experienced a soft landing after the long period of high cost inflation in Norway and sluggish external activity. •  Output has returned to trend and is now showing a marked rise. •  Employment has returned to trend and is rising. •  Unemployment is at the 1996-level and is equal to the average for the 1990s. •  Wage growth is broadly in line with a level that is consistent with the inflation target given normal productivity growth. •  Overall credit growth is balanced. Credit is expanding approximately in line with trend growth in nominal GDP. •  Labour costs in Norway relative to our trading partners are now broadly in line with a long-term average. •  The nominal krone exchange rate is on a par with the average for the 1990s. •  The interest rate level is close to the level prevailing among our trading partners. •  Inflation expectations are approximately the same as the target.
(iii) For its part, the Governing Council completed the list of committees which will assist in the work of the European System of Central Banks (ESCB). In addition to the eleven ESCB Committees agreed upon at the meeting in July, the Governing Council decided to establish an International Relations Committee and a Budget Committee. The latter was set up in order to provide transparency to the shareholders of the ECB - the national central banks - on matters relating to the budget of the ECB. (iv) Finally, the Governing Council endorsed the draft Headquarters Agreement between the German Federal Government and the ECB, which will be signed here in Frankfurt on 18 September 1998. A number of decisions were also taken with regard to various aspects of the preparatory work for Stage Three. (a) Exchange rate policy co-operation between the euro area and other EU countries The General Council endorsed the text of an Agreement between the ECB and the non-euro area national central banks, laying down the operating procedures for an exchange rate mechanism in Stage Three (the so-called ERM II). You will recall that the European Council in Amsterdam in June last year agreed to set up an exchange rate mechanism in Stage Three to replace the present European Monetary System (EMS). For this reason, the EMI had, on behalf of the ECB, prepared a draft Central Bank Agreement to replace the current exchange rate mechanism (ERM I, if you like) by a new one in Stage Three.