The inflation measure CPI-ATE excludes the effects of changes in taxes and energy prices. Norges Bank has given weight to this indicator of underlying inflationary pressures in the economy, but also keeps an eye on other indicators. The 12-month rise in the CPIATE adjusted for the effects of lower maximum day-care rates is estimated at 1.1 per cent in March. However, the CPI-ATE not only strips out temporary effects of changes in tax changes and fluctuations in energy prices, but also trend changes in these variables. Thus, this indicator is not a full-proof measure of underlying inflation. In the last 10-20 years, where energy prices have risen at a faster pace than other consumer prices and the tax level has increased somewhat, the CPI-ATE has tended to underestimate underlying inflation. This is illustrated in the chart, which shows the difference between the year-on-year rise in the CPI and the CPI-ATE over a moving 10-year average. Since 1997, the difference has been about 0.35 percentage point. Even when taking into account trend increases in energy prices, inflation is still moderate. The indicators that provide the best expression of underlying inflationary pressures in the economy may vary over time. Driving forces ahead Monetary policy influences the economy with long and variable lags. This means we must look ahead when setting interest rates. I would therefore like to comment briefly on some international developments that are important to the Norwegian economy and the assumptions concerning developments in Norway on which Norges Bank’s assessments are based.
Jean-Pierre Roth: Recent Swiss experience in monetary policy strategy Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at a seminar on monetary theory and policy, University of Fribourg, Fribourg, 28 November 2007. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  One continually recurring element in the history of the Swiss National Bank has been the application of a clear set of rules that we refer to nowadays as ′strategy′. The SNB′s monetary policy strategy consists of three elements: a definition of price stability, an inflation forecast and a fluctuation range assigned to a short-term interest rate. Experiences with this strategy since its introduction in the year 2000 – judged in terms of both price stability and cyclical developments in the economy – have demonstrated its value. Nevertheless, certain aspects of the strategy have been questioned by academics and by central bankers. These include inflation forecasting under the assumption of a fixed Libor, the choice of the reference interest rate, the role of monetary aggregates and exchange rates in the SNB′s models, and the decision not to publish the minutes of Governing Board meetings. However, these deliberately selected elements in fact serve to reinforce the legitimacy of the SNB′s strategy. BIS Review 139/2007  1