Reports from the Central Bank of Norway No 1/2003 Inflation Report 1 03 March 2 The Inflation Report is published three times a year, and together with Financial Stability, is part of Norges Bank’s series of reports. The report is also available on Norges Bank’s website: http://www.norges-bank.no. The series of reports is included in the subscription for Economic Bulletin. To subscribe please write to: Norges Bank Subscription Service PO Box 1179 Sentrum N-0107 Oslo Norway Telephone: +47 22 31 63 83 Fax: + 47 22 41 31 05 E-mail:
[email protected] Editor: Svein Gjedrem Design: Grid Strategisk Design AS Setting and printing: Reclamo grafisk senter AS The text is set in 11½ point Times ISSN 0807-8521 Inflation Report 1/2003 Monetary policy in Norway Objective The Government has defined an inflation target for monetary policy in Norway. The operational objective is an inflation rate of 2½% over time. In general, the direct effects on consumer prices resulting from changes in interest rates, taxes, excise duties and extraordinary temporary disturbances are not taken into account. Norges Bank places particular emphasis on CPI inflation adjusted for tax changes and excluding energy products (CPI-ATE) when assessing underlying inflation. Horizon and implementation 3 The effects of monetary policy occur with long and variable lags, and Norges Bank is forward-looking in interest rate setting. The key rate (the sight deposit rate) is set on the basis of an overall assessment of the inflation outlook, normally with a view to achieving an inflation rate of 2½% two years ahead.