Norwegian policymakers face challenging times. The economy is operating with great pressure on production capacity, the labour market is tight and there are signs of overheating – which would all argue for a restrictive macroeconomic policy stance. On the other hand, the financial sector is not immune to the global financial turmoil, the housing market shows signs of a downturn, households are increasingly indebted and there are significant downside risks. The authorities responsible for fiscal and monetary policy should therefore remain vigilant and adjust their stance if the outlook changes significantly. Their forward-looking policy framework – flexible inflation targeting and the fiscal rule jointly with the creation of an overseas fund – has proved robust to shocks in the past and should continue to serve them well. Fiscal policy also needs to continue to preserve the long-term sustainability of public finances.