In conclusion, the yards will be hard I’m afraid, and we must stick to the task. The hard yards ‐ speech by Andrew Bailey | Bank of England  Page 5  I am grateful to Nishat Anjum, Jamie Bell, Justin Beresford, Ben Broadbent, Alan Castle, Pavandeep Dhami, Jonathan Haskel, Andrew Hauser, Karen Jude, Catherine Mann, Dave Ramsden, Fergal Shortall, Sophie Stone and Silvana Tenreyro for their assistance in helping me prepare these remarks. 1. Milton Friedman and Anna Jacobson Schwartz, “A Monetary History of the United States, 1867-1960”, Princeton University Press, 1971, p. 493 2. The furlough scheme, meanwhile, has pulled down measured average wages. The scheme has helped workers stay attached to their jobs but generally at lower pay than usual. But the compositional effect has more than offset this. 3. Milton Friedman and Anna Jacobson Schwartz, “A Monetary History of the United States, 1867-1960”, Princeton University Press, 1971, p. 498  Andrew Bailey Governor, Bank of England  Sign up for latest updates  The hard yards ‐ speech by Andrew Bailey | Bank of England  Page 6
The Executive Board described the background for the decision as follows: •  Underlying inflation has been lower than projected in recent months. Nevertheless, several factors point to higher inflation ahead. Capacity utilisation is high and there is little spare capacity in the Norwegian economy. Employment is rapidly rising and unemployment has exhibited a marked decline. There are signs of higher wage growth and expectations of rising inflation. At the same time, the krone exchange rate has depreciated from strong values. •  The interest rate path presented in Inflation Report 3/06 will provide a reasonable balance between the objective of bringing up inflation towards target and the objective of stabilising developments in output and employment, conditional on the information currently available to Norges Bank. •  Monetary policy influences the economy with a lag. Over several years, interest rates have been considerably lower than what Norges Bank considers to be a neutral level. The interest rate may gradually be raised to a more normal level at a somewhat faster pace than envisaged earlier, although it is unlikely that rates will be raised at every monetary policy meeting. Based on Norges Bank’s current assessment, the interest rate will thus continue to be raised in small, not too frequent steps if economic developments are broadly in line with projections.