Norway's Bergo on interest rate projections

"Thus, it can be argued that it is important to adhere to the previously communicated response pattern and behave consistently over time. This puts the central bank in a better position to utilise the expectations channel. Inflation can then over time be stabilised with smaller fluctuations in output and employment than would otherwise be the case.

"Here it is crucial to reinvoke the point I made earlier in my speech. Even if monetary policy follows a commitment strategy, the interest rate path may well change from one inflation report to the next. If for example new information concerning economic developments leads to a change in the outlook, the interest rate path will normally shift as well. In this respect, one can say that we are commiting to a reaction pattern, not to a specific interest rate path. Reacting to new information is part of a predictable pattern of behaviour.

Speech by Norges Bank deputy governor Jarle Bergo at the Foreign Exchange Seminar of the Association of Norwegian Economists at Sanderst Ølen on 26 January 2007.

Click here to read the speech