The inflation target is an anchor for inflation expectations in the foreign exchange market, for the social partners in connection with wage settlements and for those setting prices for goods and services. In recent years, average inflation has been fairly close to, but somewhat lower than, the target of 2.5 per cent. Consumer price inflation peaked in October 2008 and has since receded. In the year to August 2009, CPI inflation was 1.9 per cent. Inflation measured by the CPI varies somewhat from month to month, primarily reflecting wide fluctuations in energy prices. CPIXE inflation shows developments in the consumer price index adjusted for tax changes and excluding temporary changes in energy prices. This indicator provides a more accurate picture of underlying inflation. By this measure, underlying inflation peaked at 3 per cent last autumn, but has since slowed somewhat and was 2.3 per cent in August. Underlying inflation is now below the inflation target. Inflation is slowing as a result of the decline in output and wage growth last year and the beginning of this year and is expected to fall to below 2 per cent in early 2010. Inflation ahead will depend on how quickly capacity utilisation picks up and by developments in the krone exchange rate. Activity in the Norwegian economy has held up better than expected just a few months ago. Higher capacity utilisation and low productivity growth may result in stronger-than-expected upward pressure on costs and point towards somewhat higher inflation in the medium term.
In the case of payments, that key risk is money laundering and terrorist financing (ML/TF), and the balance that we have to strike is to allow new e-wallet businesses to start quickly, but also ensure that ML/TF risks are managed before they get too large. In this context, while KYC continues to be a key requirement, we allowed smaller wallets holding funds of no more than $ to carry out simplified KYC requirements. This framework is similar to those used in other markets like Hong Kong, India, Australia and the UK. Finally, as a market, how do we ensure that e-payments function smoothly with each other and the financial system? Many of us think of smooth functioning as having liquidity 13.  providers in capital markets through volatile periods. That is because capital markets are welloiled systems that interoperate between banks and trading venues, and even among banks. Not so with e-payments. E-payments have grown quickly because they have been able to develop their own systems quickly – but this has resulted in some fragmentation. Although the vast array of 14.  payment solutions offers more choices to consumers and merchants, too much choice is not always a good thing: a. Consumers may end up holding three or four different e-wallets in order to get the best deals from each: one for transport, one for shopping, and another to split bills with friends.