In addition to these conventional unconventional measures there are also unconventional unconventional measures. When credit markets are dysfunctional, as some are at present, targeted purchases by the Bank of England of assets may improve liquidity in markets for those credit instruments. The objective of such purchases would be not only to boost the supply of broad money but also to increase liquidity and trading activity in the markets for those assets. A reduction in the illiquidity premium for a particular credit instrument might help to stimulate issuance by corporate borrowers and the resumption of capital market flows, thus reducing reliance on bank lending. It could also raise the values of assets that are currently under-priced because of high illiquidity premia, helping to strengthen the balance sheets of banks and other financial institutions. Yesterday the Government authorised the Bank of England to conduct such operations, financed by the issue of Treasury Bills, in order to improve the flow of credit to companies. But at some point the Monetary Policy Committee might wish to adopt these unconventional measures as an instrument of monetary policy. In conducting such operations, it is important to choose the markets in which to intervene extremely carefully. There is a fine dividing line between helping to oil the wheels in markets which are temporarily impaired, and artificially supporting markets in which there is no underlying demand.
According to preliminary national accounts figures, mainland GDP grew by 2.2% from 2009 to 2010. Norges Bank’s regional network contacts expect solid growth to continue in the coming quarters. Unemployment is low. There are prospects of  BIS central bankers’ speeches  1  fairly strong growth in the Norwegian economy ahead, driven by solid income growth and an increasing population. Chart: Population growth In 2010, the population grew by 1.3 per cent. With the exception of 2008, this is the highest rate of population growth since 1920. A high birth rate has contributed, but strong population growth primarily reflects high inward migration. This is boosting demand for goods and services, including housing. Nonetheless, it is likely that a high proportion of labour immigration will enable the economy to grow faster without fuelling price and wage pressures, even though bottlenecks may arise in some areas. Chart: Consumer prices 2010/11 The rise in consumer prices slowed through 2010, and in recent months inflation has been fairly low. Inflation has varied from month to month as a result of wide fluctuations in electricity prices. Overall CPI inflation rose by 2.5 per cent in 2010. If we exclude fluctuations in energy prices, the rise in prices has been low. In 2010, CPIXE inflation was 1.7 per cent. Chart: Interest rate forecasts Norges Bank raised its key policy rate to 2 per cent in May 2010. Through 2010 the Bank’s interest rate forecast was adjusted down, and further increases were deferred.