A key question for many supervisors, and particularly for our colleagues in emerging market jurisdictions, is whether the New Accord represents the next step to take. The Committee’s view has always been that the fundamentals come first. It is only after a solid foundation for a sound banking and regulatory system is in place that anyone should contemplate the more sophisticated requirements of the New Accord. Over time, it is our hope that more and more countries will adopt the new framework, but not before they are ready. The better capitalised and the better managed that all banking systems are worldwide, the more resistant the global financial system will become to periods of distress. For this reason, the Committee developed a “simplest standardised approach” during the consultations leading up to CP3. This approach has been developed with the assistance of some of our non-G10 colleagues. More recently, we have developed guidance to assist non-G10 supervisors in making decisions about adoption of Basel II and to help them achieve the transition in the way best suited to their national circumstances. Emerging market supervisors have welcomed both the simplest standardised approach and the transition guidance. And we will do more in this regard. We are currently considering how we might best enhance and upgrade our structures for co-operation with non-G10 countries at the Committee level. BIS Review 42/2003  3  Accounting Standards and Basel II I would like to turn now to the third topic on my list.
The tighter the labour market is, the higher wage growth will be. Demand for goods and services determines to a great extent how tight the labour market will be. High levels of private and public consumption, investment and exports will sustain the demand for labour. When the supply of labour is limited, the competition for labour pushes up wages. A tight monetary policy stance with a high real interest rate will curb domestic demand. In many countries, low and stable consumer price inflation is the goal of monetary policy. Consequently, we can assume that imported price inflation will remain subdued. However, price inflation will nonetheless vary in pace with global economic developments. The krone exchange rate also plays an important role in determining import prices. A strong krone exchange rate will curb prices for imported goods, while a weak krone exchange rate will result in higher prices. When there is a rise in the interest rate in Norway and a widening differential between domestic and foreign interest rates, investments in NOK will increase, and the krone exchange rate will rise. Price inflation may vary considerably from month to month. This variation may be due to random or temporary conditions, such as fluctuations in electricity prices or petrol prices, or the effects of changes in real taxes. When we assess the interest rate, we disregard these effects. Statistics Norway has constructed an indicator for adjusted price inflation - CPI-ATE - which is the measure we use to examine the results of monetary policy performance.