Excluding electricity and petrol prices and adjusting for changes in indirect taxes, price inflation was approximately 2½ per cent, which is in line with the current inflation target. It should be pointed out, however, that our adjustment of the figures may overestimate these effects. We assume, for example, that increases in indirect taxes are passed on in their entirety to the consumer. In practice, changes in indirect taxes are often shared by manufacturers and consumers based on the intensity of the supply-and-demand reaction to price increases. In addition, increases in electricity prices are not only the result of last year’s low precipitation levels in Western Norway and  BIS Review51/2001  3  higher electricity taxes. Other, more permanent conditions may also have contributed. The increase in petrol prices leads to higher prices on other goods such as transport services and we have not adjusted for this. However, adjusting inflation figures for direct effects of one-off factors can also be associated with pitfalls. Higher indirect taxes and an increase in petrol and electricity prices may be a source of accelerating inflation, via spillover effects on other prices and wages. Other countries with inflation targets adjust the consumer price index for temporary and random factors in a variety of ways. In the UK, changes in interest rates have a strong, direct impact on the consumer price index. The Bank of England aims at an inflation target that is adjusted for such effects.
BIS Review51/2001  11  First, monetary policy can well be delegated, because over time there is no real conflict between the objectives of price stability, on the one hand, and economic growth and equitable distribution, on the other. The formulation of objectives and subsequent evaluation of practice make adequate provision for the more short-term considerations. Second, it is possible to formulate fairly precise objectives for monetary policy and establish reporting routines that ensure that those who delegate authority can subsequently evaluate the implementation. Norges Bank provides an account of its actions in the Bank’s Annual Report, and the evaluation of the Ministry of Finance, the Government and the Storting appears in and is based on annual reports to the Storting. Finally, the need for transparency and communication argue in favour of delegation. As previously mentioned, each monetary policy decision must be consistent with previous and future decisions, and be directed towards a clearly defined target. Thank you for your attention. 12  BIS Review 51/2001