Norges Bank will increasingly use the Fund’s properties in developing investment strategies ahead, with particular emphasis on taking advantage of the Fund’s size and long-term investment horizon. BIS Review 45/2008  5  Norges Bank’s mandate sets the tracking error limit at 1.5 percentage points. Given this limit, the actual portfolio return is likely to deviate by less than 1.5 percentage points from the benchmark portfolio in two of three years, but it also implies a risk that active management may reduce the return by more than 1.5 percentage points every sixth year. In light of the size of the Fund, this will be a substantial amount in krone terms. Losses from active management must be expected in periods. Losses are not necessarily an indication that active management is not conducted professionally or not using the right strategies. The performance of the Fund’s investment management must be evaluated over a long time horizon. Even if the contribution from active management was negative for the first time in the Fund’s history last year, it does not change our confidence in and conviction that our organisation will contribute to achieving excess returns in the longer run. Thank you for your attention.
In the light of the prevailing uncertainties, it is essential that the bank lending channel continues to function well. To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need to preserve an appropriate degree of monetary accommodation in order to secure a return of inflation rates towards levels that are below, but close to, 2% without undue delay. Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance supports economic activity. As emphasised repeatedly by the Governing Council, and as again strongly echoed in both European and international policy discussions, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the European level. The implementation of structural reforms needs to be substantially stepped up to reduce structural unemployment and boost potential output growth in the euro area. Structural reforms are necessary in all euro area countries, although specific reform needs differ across the individual economies. The focus should be on actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, which are vital to increase investment and boost job creation. The enhancement of current investment initiatives, including the extension of the Juncker plan, progress on the capital markets union and reforms that will improve the resolution of non-performing loans will also contribute positively to this objective.