Norges Bank

Norges Bank is Norway's central bank and plays a vital role in maintaining the country's economic stability. It is tasked with managing the Government Pension Fund Global as well as its own foreign exchange reserves. The main objective of Norges Bank is to ensure economic stability and oversee significant assets on behalf of the Norwegian people. The bank has both executive and advisory functions related to monetary policy and is responsible for promoting efficient payment systems and financial markets. Additionally, it manages Norway's foreign exchange reserves and the Government Pension Fund Global (GPFG) for the government. The investment strategy of the GPFG aims to achieve the highest possible returns while complying with its investment mandate. Norges Bank operates as a separate legal entity owned by the state.

The operations of Norges Bank are regulated by the Central Bank Act, which defines the goals of central banking activities, including the maintenance of monetary stability and the assurance of a stable financial system along with an efficient and secure payment system. The central bank is also expected to support high and stable levels of output and employment. The government has set an inflation target for monetary policy through regulations associated with the Norges Bank Act. The bank's responsibilities in managing the GPFG are outlined by regulations issued under the Act and a separate management agreement with the Ministry of Finance.

The operations of the bank are organized around clearly defined core activities:

Monetary Policy

Norges Bank's monetary policy aims to maintain monetary stability by keeping inflation low and stable, with an operational target of around 2 percent inflation over time. This indicates that Norway adheres to an inflation-targeting monetary policy regime, which is both forward-looking and adaptable to support high and stable output and employment while addressing financial imbalances. The liquidity management of Norges Bank seeks to ensure that the Executive Board's interest rate decisions effectively influence short-term money market rates by managing the level of bank reserves.

Financial Stability

Norges Bank is responsible for promoting financial stability and contributing to strong financial infrastructures and payment systems. Its settlement system facilitates interbank payments and ensures the efficient supply of banknotes and coins. The bank also supervises Norwegian payment systems.

Asset Management

On behalf of the Ministry of Finance, Norges Bank manages the Norwegian Government Pension Fund Global. The foreign exchange reserves act as contingency funds in international currencies for foreign exchange market transactions. Furthermore, the bank manages government debt according to a mandate from the Ministry of Finance, which includes fulfilling the government's borrowing needs and managing outstanding government debt.

The primary tool of monetary policy is the policy rate, which is the interest rate on banks' deposits in Norges Bank up to a specified quota. This rate is crucial for stabilizing inflation and influencing the Norwegian economy. The policy rate affects interbank rates and banks' interest rates on customer deposits and loans, which in turn impact the krone exchange rate, securities prices, housing prices, credit demand, consumption, and investment. The policy rate also shapes expectations regarding future inflation and economic conditions. Norges Bank's Executive Board determines the policy rate, typically making monetary policy decisions eight times a year during designated monetary policy meetings.