Øystein Olsen: Management of the Government Pension Fund Global Introductory statement by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting, Oslo, 3 May 2021. * * * Please note that the text below may differ from the actual address. I would like to thank the Committee for the invitation to speak on the Bank’s management of the Government Pension Fund Global (GPFG). Norges Bank manages the GPFG with the objective of achieving the highest possible return over time within the limits of the investment mandate defined by the Ministry of Finance. The GPFG is to be managed within an adequate control and risk management framework and in a responsible and efficient manner with a high degree of transparency. The GPFG is managed to track the benchmark index fairly closely, ie the return largely tracks the return on the benchmark index. The benchmark index is defined by the Ministry of Finance and endorsed by the Storting. However, even though Norges Bank closely tracks the GPFG’s benchmark index, many large and small choices have to be made every day. These choices are based on a clear mandate from the authorities and a well thought-out investment strategy. The year 2020 was a special year for us all, including the GPFG. As for many others, working conditions during the Covid-19 pandemic have been demanding.
One point on which I don’t agree with Franco Bruni’s analysis concerns his judgement on changing the objective of monetary policy after the failure of Lehman Brothers on 15 September 2008. Bruni writes: “…the objective became only that of saving the credit system from the collapse. This last change of objective is of great conceptual and political importance, it has a significance that could prove to be, so to speak, historic. And yet it has never been officially declared, particularly by the ECB”. The proof that he provides for the above remarks is the decision to reduce interest rates from 2% to 1.5% in March this year, a step which, in his opinion, was not justified by the trend of the economy, but by the problems facing Europe’s banking system. There is a misunderstanding here that needs to be quickly clarified, also in view of the ensuing discussion on macro-prudential supervision and on the powers of the central banks in question. From the outset of the crisis in August 2007, the ECB has pursued a policy of separation between, on the one hand, the interest rate decisions, based solely on the priority objective of price stability and, on the other hand, the decisions concerning the instruments used to pump liquidity into the system in order to tackle the difficulties being encountered by the market.