Norges Bank 11 Executive Board meeting 23 January 2008

Norges Bank 22 The Executive Board’s strategy  The key policy rate should be in the interval 4¾ - 5¾% in the period to the publication of the next Monetary Policy Report on 13 March 2008, unless the Norwegian economy is exposed to major shocks. Given the inflation target, we will be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. Monetary Policy Report 3/07 – Conclusions

Norges Bank 3 30% 50% 70% 90% Output gap Underlying inflation (CPI- ATE) Key policy rate Inflation (CPI) Sources: Statistics Norway and Norges Bank Baseline scenarios in Monetary Policy Report 3/07 In per cent Q1 – 2010 Q4

Norges Bank 4 Domestically produced goods and services (0.7) Imported consumer goods (0.3) CPI-ATE Sources: Statistics Norway and Norges Bank CPI-ATE 1) Total and by imported and domestically produced goods and services 2). Projections in MPR 3/07 (broken line). 12-month change. In per cent 1) CPI adjusted for tax changes and excluding energy products 2) Norges Bank’s calculations

Norges Bank 55 Source: Statistics Norway Weighted median CPI-ATE 20 per cent trimmed mean CPI Inflation indicators 12-month change. In per cent. January 2002 – December 2007

Norges Bank 6 CPI-ATE Highest and lowest monthly change in the period 1999 – 2006 and monthly change in ) and In per cent Sources: Statistics Norway and Norges Bank Highest monthly change Lowest monthly change 2006 Average ) January 2006 has been adjusted for lower maximum day-care rates

Norges Bank 7 Domestic supplier sectors in the CPI-ATE 12-month change. In per cent. January 2004 – December 2007 Services where wages are the dominant factor (7 %) Domestically produced consumer goods (24 %) Sources: Statistics Norway and Norges Bank Other services (18 %) Rent (20 %)

Norges Bank 88 Labour market Employment In 1000s Unemployment In per cent. Seasonally adjusted LFS Registered unemployed LFS 1) Sources: Statistics Norway and Norwegian Labour and Welfare Organisation (NAV) 1) The changes to the LFS have resulted in a break in the time series between 2005 and 2006.

Norges Bank 9 Registered employed from new EU countries In thousands. Jan - Dec 2007 Population growth and net inward migration in Norway In thousands Population growth Net inward migration Sources: Statistics Norway and the Central Office – Foreign Tax Affairs

Norges Bank 10 Issued social security numbers to persons from new EU countries In thousands. Jan - Oct 2007 Population growth and net inward migration in Ireland In thousands Sources: Central Statistics Office Ireland and Department of Social and Familiy Affairs Population growth Net inward migration

Norges Bank 11 Index of commodity consumption Volume. Seasonally adjusted. Jan 2005 – Nov Source: Statistics Norway

Norges Bank 12 Regional house prices 12-month change. In per cent. Jan 2006 – Dec 2007 Hedmark Agder Norway Akershus RogalandHordaland Trøndelag Nord-Norge Oslo Vestfold Sources: Norwegian Association of Real Estate Agents, Association of Real Estate Agency Firms, FINN.no, ECON Pöyry, Statistics Norway and Norges Bank

Norges Bank 13 Key policy rate, money market rate 1) and banks’ lending rate on new loans 2) In per cent. 2 Jul 2007 – 21 Jan 2008 Mortgage rate Money market rate Key rate Sources: Norsk familieøkonomi AS and Norges Bank 1) 3-month NIBOR 2) Interest rates on new mortgage loans for NOK 1 million within 60% of purchase price with floating interest rate. Figures for the 20 largest banks, weighted according to market share.

Norges Bank 14 Sources: Consensus Economics, IMF and OECD Lehman Brothers Consensus Forecast Projections for GDP growth in the US in 2008 In per cent. Aug 2007 – Jan 2008 Goldman Sachs JP Morgan Morgan Stanley Merrill Lynch IMF 1) OECD projections from EO 81, May 2007 and EO 82, December 2007, indicated by grey dots. OECD 1)

Norges Bank 15 The US housing market Jan 1959 – Dec 2007 Sources: Reuters (EcoWin) and Norges Bank Building permits 1) (left-hand axis) Housing starts 1) (left-hand axis) Case-Shiller home price index 2) (right-hand axis) 1) 3-month moving average. In millions. 2) Composite 10 Index, 12-month change. Per cent. Millions Per cent

Norges Bank 16 Unemployment and employment growth in the US Seasonally adjusted unemployment. 12-month employment growth. In per cent. Jan 1995 – Dec 2007 Source: Reuters (EcoWin) Unemployment Employment growth

Norges Bank 17 US (S&P 500) Japan (Nikkei) Emerging economies (MSCI) Norway (OSEBX) Europe (STOXX) Equities Indices 1 Jan 2007 = Jan 2007 – 22 Jan Source: Reuters (EcoWin)

Norges Bank 18 Oil price (Brent Blend). Spot and futures prices In USD per barrel. 1 Jan 2003 – 1 Dec Jan MPR 3/07 Source: Reuters (EcoWin) and Norges Bank

Norges Bank 19 Commodity prices, metals In SDRs. Indices. 3 Jan 2005 = Jan 2005 – 22 Jan 2008 Sources: Reuters (EcoWin), The Economist and Norges Bank Aluminium Copper Nickel Zinc The Economist commodity-price index, metals MPR 3/07

Norges Bank 20 Commodity prices, food In SDRs. Indices. 1 Jan 2005 = Jan 2005 – 22 Jan 2008 MPR 3/07 Sources: Reuters (EcoWin), The Economist and Norges Bank Wheat Maize Coffee Soyabeans The Economist commodity- price index, food

Norges Bank 21 Key rates and forward rates In per cent. 12 Dec 2007 and 22 Jan 2008 Norway US Euro area 22 Jan 2008 After previous monetary policy meeting (12 Dec 2007) UK Sources: Reuters and Norges Bank

Norges Bank 22 Difference between three-month money market rates and expected key rates 1) Jul 2007 – Nov In percentage points. At 22 Jan 2008 US Euro area UK Norway 2) Sweden 1) The expected key rate is measured by the Overnight Indexed Swap (OIS). 2) Norges Bank’s projections. Sources: Bloomberg, Reuters (EcoWin), Morgan Stanley and Norges Bank

Norges Bank 23 Credit premiums on corporate bonds 1) Five-year maturity. In percentage points. 1 Jan 2004 – 22 Jan 2008 Source: Reuters (EcoWin) US Europe 1) Bonds with a BBB rating.

Norges Bank 24 Key policy rate in the baseline scenario and estimated forward rates 1) In per cent. At 22 Jan Sources: Reuters and Norges Bank 1) A credit risk premium and a technical difference of 0.20 percentage point have been deducted to make the forward rates comparable with the key policy rate. Market 22 Jan 2008 Market 12 Dec 2007 Baseline scenario MPR 3/07

Norges Bank 25 I-44 (left-hand scale) Weighted interest rate differential (right-hand scale) 12 Dec Jan month interest rate differential and import-weighted exchange rate (I-44) 1) Jan 2002 – Dec 2010 MPR 3/07 22 Jan 2008 Sources: Reuters and Norges Bank 1) A rising curve denotes an appreciation of the krone. IndexPer cent

Norges Bank 26 The Executive Board’s strategy  The key policy rate should be in the interval 4¾ - 5¾% in the period to the publication of the next Monetary Policy Report on 13 March 2008, unless the Norwegian economy is exposed to major shocks. Given the inflation target, we will be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. Monetary Policy Report 3/07 – Conclusions

Norges Bank 27 Executive Board meeting 23 January 2008