There were prospects that the interest rate would rise further at about the same pace. The key rate was raised by a further 0.25 percentage point at the meeting of the Executive Board on 16 August. At its meeting on 27 September, Norges Bank’s Executive Board decided to leave the key rate unchanged at 3.00 per cent. The background for the decision was described as follows: "There is little slack in the Norwegian economy. A steadily rising share of enterprises lacks the capacity to accommodate increased demand, largely because of labour shortages. The labour market has grown considerably tighter, and there are several signs that wage growth is picking up. Developments in aggregate demand, output and employment suggest a higher interest rate. At the same time, the rise in consumer prices is slowing, and the rise in prices excluding energy products is unexpectedly low. This suggests a continued low interest rate." The Executive Board’s overall assessment was that the strategy published in the Inflation Report, coupled with new information, warranted that the interest rate should be left unchanged at this meeting. Projections are uncertain. The uncertainty surrounding the interest rate forecasts is illustrated in the fan chart and indicates that monetary policy reacts to disturbances to the economy. This contributes to increasing the uncertainty surrounding future interest rates, but at the same time contributes to stabilising economic developments. Monetary policy cannot fine-tune economic developments, but it can prevent the largest effects from occurring when the economy is exposed to disturbances.
It is, therefore, important that in the examination that follows a country’s request for a convergence report due consideration be given to the policy consistency and credibility of the applicant country. A comprehensive economic analysis that is not only quantitative but also qualitative, and which recognizes the difficultly of simultaneously satisfying all the Maastricht criteria in the current world environment would encourage EMU candidate countries to persist in their efforts to achieve even closer nominal and real convergence. It would also provide further evidence that the euro project is credible, that it is both feasible and realizable in a near-term perspective. Let me conclude by thanking you again for being here to contribute to a deeper understanding of the challenges ahead. I also wish you a pleasant stay in our country. BIS Review 53/2006  5