"As before, we will carefully assess the report's advice in those areas that relate to the conduct of monetary policy in Norges Bank," says Svein Gjedrem in his comments to the report from Norges Bank Watch.

"One important aspect of monetary policy that Norges Bank Watch has not explicitly touched upon is the background for developments in the Norwegian economy in recent years. Norges Bank's assessment has been that the Norwegian economy has experienced a soft landing in 2003 after several years of high cost inflation and decline in the global economy. At the same time, inflation has been too low. Our analyses show that the unusually low inflation is primarily due to three factors: First, intensified competition in the goods and services markets has probably contributed to improving productivity in the Norwegian economy. Second, the sharp fall in prices for some imported goods, measured in foreign currency, has contributed to low inflation. And finally, the krone appreciation through 2002 has had a lagged effect on consumer prices. The appreciation of the krone was related, among other things, to unexpectedly weak developments in the global economy that resulted in lower interest rates abroad and a wider interest rate differential between Norway and other countries. The interest rate differential had an unexpectedly strong effect on the krone as a result of other international conditions.

"These analyses were presented in Norges Bank's Annual Report in March. The report from Norges Bank Watch does not provide strong grounds for deviating from our earlier assessments," concludes Svein Gjedrem.

"We would also like to comment about one item in the report's introduction. Norges Bank Watch regrets that they were unable to have separate meetings with the external members of Norges Bank's Executive Board while working on the report. The Executive Board's members evaluated this. We came to the conclusion that we should follow Norges Bank's normal practice. Our practice is that the Executive Board acts as one body with the chairpersons as spokesmen. As previously announced, the Executive Board will assess its way of working, and also in this area address the advice from Norges Bank Watch," says Svein Gjedrem.