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, 21 May 2013. *  *  *  Please note that the text below may differ from the actual presentation. I would like to thank the Chairman of the Committee and thank you for this opportunity to report on the conduct of monetary policy in connection with the Storting’s deliberations on the Government’s Financial Markets Report. My statement here today is based on the Bank’s Annual Report, but also on the Executive Board’s assessments for the period to the most recent monetary policy meeting and new information. When I was here last year, the key policy rate had been reduced by 0.25 percentage point to 1.5 percent in March. The key policy rate has since been kept unchanged. The key policy rate is low because inflation is low and because external interest rates are at very low levels. The year 2012 was characterised by weak growth among Norway’s trading partners and turbulence in financial markets. Uncertainty about global economic developments, particularly in Europe, was high. Key rates in many countries were close to zero, and both the European Central Bank (ECB) and the Federal Reserve announced that key rates would be kept low for a long period. Economic developments in many advanced economies remained weak into 2013.
Within its own remit, each NCB carries out the regular tenders orchestrated by the ECB and grants refinancing within the framework of these periodic auctions of central bank money. The NCBs manage the settlement accounts of credit institutions, hold the standing facilities for overnight credit and deposits, and also monitor minimum reserves. They are in constant contact with the ECB and supply it with all the daily data essential to the conduct of effective monetary policy. •  A rapid integration of the national money markets  It was crucial to enable liquidity to circulate smoothly from one financial centre to another in the euro area so that operators could conduct the necessary arbitrage between the different centres, thus ensuring a single euro interest rate for each maturity. The TARGET system is the key component of this unification. Right from the start of 1999, it enabled credit institutions to effect large-value, crossborder transactions with same-day value all day long, thus allowing the interbank market to function as a single market right away.