15  Financial Services Authority (2009): “Strengthening Liquidity Standards”, Policy Statement 09/16, UK October. BIS Review 131/2009  15  House prices in Norway have risen sharply and probably excessively. We must take account of developments in equity prices and property prices when projecting inflation and output. Norges Bank’s interest rate setting does not rely solely on one simple rule. Instead, we seek to take account of all factors that influence inflation and output in the medium term, and the key policy rate is set on the basis of an overall assessment. Asset prices such as house prices, the exchange rate and credit growth therefore have a bearing on Norges Bank’s interest rate setting. A written formulation of Norges Bank’s monetary policy reaction function would be fairly comprehensive and include all the variables that are considered. However, a reaction function must not be confused with the monetary policy target – our target function. The fact that we give weight to variables such as the exchange rate, house prices and credit growth in interest rate setting does not imply that there are specific target for these variables. The operational target for monetary policy is annual consumer price inflation of close to 2.5 per cent over time. Interest rate setting in a small, open economy can be particularly challenging in periods of strong credit growth and a wide interest rate differential against other countries.
Financial literacy, the Cyprus perspective and the role of the Central Bank of Cyprus In December 2020, an ad-hoc Committee was established in Cyprus with the aim of formulating a National Strategy for the promotion of financial literacy and financial education in the country. The CBC has coordinated the work of the ad-hoc Committee, which consists of members from the CBC, the Ministry of Finance, the Ministry of Education, Sport and Youth, the Cyprus Securities and Exchange Commission and two academic experts from the two public universities in Cyprus. The Committee was also supported by a Secretariat from the CBC and external scientific collaborators, all of whom are here with us today. The formulation of the National Strategy drew heavily from the results of the CBC survey on financial literacy. A key finding of the survey was that the average financial knowledge score in Cyprus is below the minimum level considered by the OECD as sufficient for someone to be counted as financially literate. The results of the survey also indicate specific population groups, which are in greater need for financial education such as the young, the unemployed, women, low income and lower  2/5  BIS - Central bankers' speeches  education citizens, and individuals who did not take economics courses during secondary education. They also indicate specific domains where lack of financial knowledge is evident, namely, interest compounding and diversification.