This is the first time we intervened in the foreign exchange market since 1999. Relatively quickly after the interventions, the market began to function more normally. 1/4  BIS central bankers' speeches  Later in spring, the krone appreciated on the back of a rise in oil prices and reduced uncertainty in global financial markets. Recently, oil prices have been broadly at the same level as at the beginning of 2020, and the krone is somewhat stronger than prior to the Covid-19 outbreak. In spring 2020, risk premiums in the Norwegian money market rose considerably. Norges Bank took a range of measures to improve market liquidity and ensure pass-through of a lower policy rate to money market rates and bank lending rates. Among other things, Norges Bank offered banks extraordinary liquidity in both NOK and USD. In advance of the monetary policy meeting in May, financial market stress subsided and premiums in both the money and bond markets fell. The normalisation of liquidity policy is well underway. By the end of August 2021, all extraordinary loans from Norges Bank to banks will have been repaid, and the relaxation of collateral requirements for loans from Norges Bank will be reversed. Downturn in the Norwegian economy Activity in the Norwegian economy fell abruptly in 2020 Q2. The Covid-19 outbreak and extensive containment measures led to production halts and lower activity across a range of businesses. Mainland GDP was around 11 percent lower in April 2020 than in February the same year. Many employees were furloughed or made redundant.
There are always risks to the outlook – on both sides – and to ignore them in either direction would be foolish. What the MPC must do is continually update its assessment of those risks, and set policy in order that, on balance, inflation remains on track to meet the target in the medium term. No one should doubt our determination to meet the target. The inflation target introduced in 1992, and the new regime for monetary policy decision-making introduced in 1997, have shown beyond doubt that monetary policy in the United Kingdom is dedicated to maintaining low and stable inflation. Indeed, for ten years, I was, to my frustration, regularly described as a hawk. But I am neither hawk nor dove. Everyone on the Committee votes according to his or her judgement of the outlook for the economy. I have not changed. The Committee has not changed. Circumstances have changed. When confidence, output and trade around the world collapsed in the autumn of 2008, the balance of threats to the inflation outlook shifted rapidly to the downside. So the Bank of England and central banks in other industrialised countries responded by reducing official interest rates nearly to zero and injecting money directly into the economy. There will come a time when our task will be to manage the exit from such an abnormal degree of monetary stimulus. The MPC will not hesitate to begin to withdraw the current degree of stimulus when we judge that is necessary.