But the Federal Reserve states itself that in the long term stable prices are a condition for sustained output and employment growth. The introduction of formal inflation targeting has been under discussion in the US for several years. The debate was rekindled with the appointment of Ben S. Bernanke as Chairman of the Federal Reserve on 1 February this year. He has argued that quantifying the concept of long-term price stability may reduce the uncertainty associated with monetary policy and more effectively anchor longterm inflation expectations. In his view, however, the introduction of a long-term inflation target is fully  2  BIS Review 80/2006  consistent with current US monetary policy 1 . There has been little interest in US political circles in changing the monetary policy framework 2 . Pursuant to the Regulation of March 2001, the mandate for monetary policy stipulates that monetary policy shall be aimed at stability in the Norwegian krone’s national and international value, and at the same time underpin fiscal policy by contributing to stable developments in output and employment. The operational objective of monetary policy is low and stable inflation, with annual consumer price inflation of approximately 2.5% over time. The mandate implies that inflation targeting shall be flexible, so that weight is given to both variability in inflation and variability in output and employment. The concrete target for inflation varies somewhat among central banks.
However, there is a risk that rising or persistently high oil prices may gradually curb growth among important trading partners. In its June Inflation Report, Norges Bank assumed that money market rates among our trading partners would rise gradually over the next three years. The path for domestic and external interest rates does not imply considerable changes in the krone exchange rate. Given solid global growth, demand for goods and services from Norwegian export companies may remain at a high level. A growing number of export companies are facing capacity constraints, particularly in the production of metals and refined petroleum products. Export growth in the years ahead will probably occur in industries such as the engineering and shipbuilding industries. Production growth is now high in these industries and employment is rising after declining over several years. Capacity utilisation in the Norwegian economy is now higher than normal. Strong global growth is supporting both high demand and favourable prices for the Norwegian export sector. Although petroleum investment is likely to peak this year, prospects of persistently high oil prices will contribute to continued strong demand from the petroleum sector. High oil prices also generate substantial central government revenues and there are prospects of strong growth in the Government Pension Fund – Global in the next few years. This means that spending in line with the fiscal rule will lead to an increase in the structural, non-oil central government budget deficit.