In the Report on Financial Markets the Ministry of Finance makes an evaluation of the conduct of monetary policy by Norges Bank in 2002 and the first 8 month of 2003.

The Government is committed to the monetary policy regulation of March 2001 1Cfr Report no. 29 (2000-2001) to the Storting.. Norges Bank’s implementation of monetary policy is geared towards maintaining low and stable inflation. The operational target is defined as an annual increase in consumer prices close to 2.5 per cent over time. The conduct of monetary policy should also contribute to stabilize developments in output and employment. Monetary policy should be forward looking, and direct effects on consumer prices stemming from changes in interest rates, taxes, excise duties and extraordinary, transient disturbances should in general not be taken into account. Consumer price inflation is a general rule expected to remain within 1 percentage point of either side of the target.

The mandate thus entails a flexible inflation target. This is also emphasised by Norges Bank in its Report on the conduct ofmonetary policy in 2003 - the first eight months.

The Report reviews trends in the financial services industry.

The Ministry of Finance observes that the strong credit growth over a number of years has increased the debt ratio of the household sector as well as the corporate sector. On the other hand, the fall in interest rates has reduced the interest burden in both sectors.

The Ministry also observes that the banks in general are well capitalised. The ability of life insurance companies to withstand losses has improved but is still relatively weak. As a consequence, their investments in equity instruments are limited. In the Report, the Ministry emphasises that each and every life insurance company must adjust their risk exposure in accordance with their ability to withstand losses.