The main responsibility for counteracting financial imbalances cannot lie with monetary policy. If monetary policy seeks to pursue goals beyond its reach, the credibility of monetary policy will gradually weaken. Regulation and oversight of financial institutions must therefore continue to be the first line of defence against shocks to the financial system. The regulation of Norwegian banks largely follows EU rules, which in turn are governed by guidelines decided by the Basel Committee. Generally, we have been able to implement stricter regulation more rapidly than most other countries, partly because the economic downturn in Norway has been relatively mild. The Ministry of Finance has also introduced residential mortgage lending regulations to slow down the increase in house prices. Conclusion I believe both international and our own experiences with inflation targeting have been predominantly positive. While the exchange rate targeting regime that prevailed until the late 1990s tended to function procyclically, flexible inflation targeting has contributed to stabilising the economy when it has been exposed to shocks. In Norway, we can now look back on a quarter of a century of price stability. At the same time, employment has shown less variation since 2001 than in previous periods, in spite of the substantial disturbances that have hit the Norwegian economy. In the early years of inflation targeting, policymakers had high ambitions of fine-tuning inflation to meet the target and of achieving this goal within a clearly defined time horizon. But useful lessons have been learned.
Nordic Summit 2021 – 25 May 2021 Inflation and monetary policy in a post-Covid-19 world  Speech by François Villeroy de Galhau, Governor of the Banque de France  Press contact: Mark Deen (mark.deen@banque‐france.fr), Déborah Guedj (deborah.guedj@banque‐ france.fr)  Page 1 sur 9 Ladies and Gentlemen, I am delighted to be with you today. Denmark and the Nordics are among the most successful countries in Europe, and even worldwide: a unique mix of economic innovation, social cohesion, and environmental commitment. But today, in the country which is with its currency at the closest frontier of the euro area, you invite me to speak about “Inflation and monetary policy in a postCovid-19 world”. As of 2006, Olivier Blanchard said : “Monetary policy can pretend to be close to science if it can be conducted using simple and robust rules […] Monetary policy must be closer to art if it is frequently confronted to new, poorly anticipated and poorly understood, contingenciesi.” The current debate on monetary policy is a perfect illustration. While a few years and even a year ago everybody feared the disappearance of inflation, the world is now worried by its comeback. While a few months ago the emergency support in the face of the Covid crisis was the No.1 concern, we are now talking about exit and post-Covid world. This is precisely the title of the speech you invited me to give.