The correction reflects the pace of housing construction, which has risen to a high level, at the same time as population growth has shown a marked fall. In addition, the requirements in the residential mortgage regulation were tightened on 1 January 2017. Nevertheless, so far the correction seems to be limited, and house prices have edged back up in recent months. Chart: Key policy rate The key policy rate has now been 0.5 percent for a good two years. The very low level of global interest rates has contributed to the low interest rate level in Norway. At the same time, the Executive Board’s assessment through 2017 and into 2018 has been that there is a continued need for an expansionary monetary policy. The projections for the key policy rate have gradually been revised up as the outlook for the Norwegian economy has improved. Economic activity is now approaching a normal level, and inflation is projected to move up in the period ahead. Our latest analyses, presented in March 2018, suggest that the key policy rate will most likely be raised after summer 2018. At the same time, the Executive Board has given weight to the consideration that uncertainty as to the effects of a higher interest rate suggests a cautious approach to interest rate setting. Chart: Consumer prices Looking at the wider picture, we can, 17 years after inflation targeting was formally introduced in Norway, draw the conclusion that the system has functioned well.
Øystein Olsen: The conduct of monetary policy 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 (Norwegian parliament), Oslo, 14 May 2018. * * *  Accompanying slides Thank you for this opportunity to report on the conduct of monetary policy. My introduction here today is based on Norges Bank’s Annual Report for 2017 and our monetary policy assessments up to the monetary policy meeting at the beginning of May. The various components of economic policy must interact to achieve sound and stable economic developments over time – with high employment and low unemployment. The primary objective of monetary policy is to maintain monetary stability. Since 2001, the operational target of monetary policy has been low and stable inflation. This has been retained in the new regulation on monetary policy issued by the Government on 2 March this year. The regulation clarifies the monetary policy mandate and will not result in significant changes in the conduct of monetary policy. I will return to this topic later, but first of all I would like to go back to just over a year ago. At the beginning of 2017, the level of spare capacity in the Norwegian economy was still fairly high and there were prospects that inflation could remain below the inflation target in the coming years. International interest rates were very low.