Knowledge bank
Key questions and concepts for the economy and the financial system - briefly explained
The policy rate
How does the policy rate influence you?
The level of the policy rate influences, directly and indirectly, many of the everyday economic decisions you make.
How is the policy rate set?
The policy rate is set by the Monetary Policy and Financial Stability Committee, normally eight times a year.
How does the policy rate influence other interest rates?
Once the Monetary Policy and Financial Stability Committee determines the policy rate, the Committee sets the banks' deposit and lending rates in Norges Bank. This is the first step toward the policy rate influencing other interest rates in the economy.
How does the policy rate influence the economy and inflation?
Changes in the policy rate influence activity levels across the whole economy and thereby inflation. The impact is transmitted through various channels and often with some lag.
Inflation and monetary policy
Why do we want low and stable inflation?
Both rapidly rising and falling prices can pose challenges to the economy. The best course of action is therefore to aim for something in between.
What is monetary policy?
Monetary policy is about how the policy rate influences variables such as inflation and economic growth.
Financial stability
Why are banks so important?
A well-functioning financial system is fundamental to a modern economy, and banks perform important functions for society. They must therefore be secure.
What is Norges Bank’s role in the financial system?
The central bank is the core of the financial system and is responsible for ensuring that important pieces of the system function.
What is the countercyclical capital buffer?
The countercyclical capital buffer is a component of the total capital requirement that banks must meet to be more resilient. It is intended to contribute to building bank capital during upturns.
Money and payment system
How are payments made?
There are primarily two types of money in the payment system, notes and coins issued by Norges Bank (cash) and deposits in banks (deposit money).
Are we headed towards a cashless society?
The emergence of new types of payment instruments throughout history has been gradual and payment instruments are constantly evolving. Cash will nevertheless continue to be in use for many years.