It seems reasonable to conclude, however, that an evaluation of the Riksbank’s policy for inflation must recognise that a part of the changes in the rate of inflation stems from transitory effects occasioned by the Riksbank’s own measures. 3. The current assessment The March inflation report I should now like to turn to the outlook for inflation in the coming years. In order to provide as open and clear a picture as possible of how the Riksbank analyses the future prospect for inflation and approaches the construction of monetary policy, we present reports on this four times a year. In the latest report, published this March, it was considered that the GDP growth rates for 1997 and 1978 would be 2 and 3 per cent, respectively. It was also foreseen that no appreciable capacity restrictions should arise in these years. With an unchanged monetary stance and given that households and firms continue to count on inflation remaining low, underlying domestic inflation (the CPI change excluding transitory effects on inflation) one to two years ahead was judged to be between 1.5 and 2 per cent. In that the transitory effects will be dropping out of the 12-month change figures, however, registered inflation will move up by degrees in 1997 and 1998. In March we counted on the annual rate of inflation in 1997 being around 0.5 per cent, which would still be clearly below the inflation target. We also envisaged that in 1998 inflation would be somewhat below 2 per cent.
Since the beginning of the year, domestic inflation has edged down, hovering around 1.3 per cent. Adjusted for the reduction in day-care rates in January this year, the year-on-year  2  BIS Review 80/2006  rise in domestic prices has been 1.6 per cent. The rise in prices has been lower than expected for both goods and services. There may be several factors behind the low inflation rate. Strong competition between various producers within the food industry and construction industry may have had a dampening impact on inflation. In addition, productivity growth in retail trade has been high in the past few years. Intensified competition may also have contributed to curbing the rise in prices for banking and insurance services. Several factors point to higher inflation in the period ahead. Capacity utilisation in the Norwegian economy is rising, which will push up the rise in prices for domestically produced goods and services. A tighter labour market will probably lead to higher wage growth in the coming years. The rise in oil prices is pushing up producer input costs. Increased electricity costs may also translate into higher prices for domestically produced goods and services. Outlook for the years ahead Monetary policy will increasingly have to reflect the constraints facing some Norwegian industries. Oil prices are of importance for the activity level in the Norwegian economy and central government revenues. In recent years, oil prices have risen sharply.