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Executive Board Meeting
3 February 2010
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Mar.07 Mar.08 Mar.09 Mar.10 Mar.11 Mar.12
Projected key policy rate in the baseline scenario with fan chart from MPR 3/09With average key policy rate for 2009 Q4 and strategy interval
30%
50%
70%
90%
Source: Norges Bank
Strategy interval MPR 3/09
Criteria for a good interest rate path
1. Inflation close to target in the medium term
2. Reasonable balance between the path for inflation and the path for capacity utilisation
The assessment incorporates potential effects of asset prices on inflation and capacity utilisation
3. Robustness 4. Gradualism and consistency
5. Cross-checks against simple monetary policy rules
3
Baseline scenario MPR 3/09
-4-3-2-1012345
-4-3-2-1012345
2007 2008 2009 2010 2011 2012
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3
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5
6
7
0
1
2
3
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6
7
2007 2008 2009 2010 2011 2012
0123456789
0123456789
2007 2008 2009 2010 2011 2012
0
1
2
3
4
5
0
1
2
3
4
5
2007 2008 2009 2010 2011 2012
4
Output gapKey policy rate
CPI
Sources: Statistics Norway and Norges Bank
CPIXE
30%
50%
70%
90%
Norges Bank’s and the market’s interest rate path The key policy rate. Per cent
1
2
3
4
5
1
2
3
4
5
Jan.10 Jul.10 Jan.11 Jul.11 Jan.12 Jul.12
The market 28 Oct.
The market 16 Dec.
The market 1 Feb.
MPR 3/09
5
Sources: Bloomberg, Thomson Reuters and Norges Bank
0
50
100
150
200
250
0
50
100
150
200
250
Jan.08 Jul.08 Jan.09 Jul.09 Jan.10
Europe S&P Comp.
Japan Topix
Norway OSEBX
US S&P 500
Emerging economies MSCI
16 Dec.
6
International stock prices Total yield. Index, 1 Jan. 2009=100. 1 Jan. 2008 – 1 Feb. 2010
MPR 3/09
Source: Thomson Reuters
Credit riskEurope. 5-year CDSs on enterprises, financial undertakings and government. Basis points. 5 Oct. 2009 – 1 Feb. 2010
7
40
50
60
70
80
90
100
40
50
60
70
80
90
100
Oct.09 Nov.09 Dec.09 Jan.10
Enterprises
Financial undertakings
Government
MPR 3/09
Monetarypolicy meeting
16 Dec.
Source: Bloomberg
Effective yield differential against German 10-year government bonds Percentage points. 1 Jan. 2007 – 29 Jan. 2010
8
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
Jan.07 Jan.08 Jan.09 Jan.10
France
Finland
Ireland
Greece
Spain
Italy
MPR 3/09
16 Dec.
Source: Thomson Reuters
World trade Volume. Seasonally adjusted. January 1999 – November 2009
3-month growth1)
-15
-10
-5
0
5
10
-15
-10
-5
0
5
10
2002 2005 2008
Index
80
90
100
110
120
130
140
150
160
170
80
90
100
110
120
130
140
150
160
170
2002 2005 2008
9
Source: CPB Netherlands Bureau for Economic Policy analysis1) Three months moving average
10
PMI manufacturing in large emerging economiesDiffusion index. Seasonally adjusted. January 2000 – January 2010
30
35
40
45
50
55
60
65
70
30
35
40
45
50
55
60
65
70
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
China Russia India
Source: Thomson Reuters
Manufacturing production in emerging economies Seasonally adjusted monthly growth
-15
-10
-5
0
5
10
15
-15
-10
-5
0
5
10
15
2007 2008 2009
Brazil
South Korea
Thailand
Taiwan
Index, seasonally adjusted. Dec. 2007 = 100
65707580859095100105110115
65707580859095
100105110115
2004 2005 2007 2008
Brazil
South Korea
Thailand
Taiwan
11
Source: Thomson Reuters
Investment, credit growth and retail sales in China12-month growth. January 2000 – December 2009
0
10
20
30
40
0
10
20
30
40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
M2 growth
Credit growth (CNY-loans)
Fixed investment in urban areas 1)
12
Source: CEIC1) Growth so far this year compared with the same period one year earlier
US – housing marketIndex, seasonally adjusted. January 2001 = 100. January 2001– December 2009
13
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Existing home sales New home sales
Housing starts
Source: Thomson Reuters
MPR 3/09
UnemploymentPercentage of labour force. Per cent. Seasonally adjusted. January 1970 – December 2009
0
2
4
6
8
10
12
0
2
4
6
8
10
12
1970 1975 1980 1985 1990 1995 2000 2005 2010
US
Euro area
UK
Japan
14
Source: Thomson Reuters
Oil price (Brent Blend)USD per barrel. Daily figures. January 2002 – July 2012
15
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
2002 2004 2006 2008 2010 2012
Spot
28.10.2009 MPR 3/09
16.12.2009
01.02.2010
Sources: Thomson Reuters and Norges Bank
Public gross debtPer cent of GDP. 1970 – 2017. Projections for 2009 – 2011 and 2017
0
50
100
150
0
50
100
150
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
OECD
US
UK
Ireland
Greece
Germany
16
Source: OECD Economic Outlook 86
Growth projections for 2010 Projections by IMF at different points in time
17
0
2
4
6
8
10
12
0
2
4
6
8
10
12
US Japan China Euro area UK
IMF WEO Oct.
IMF WEO Update Jan. 10
MPR 3/09
IMF has revised up the growth
projections for the world economy
in 2010, from 3.1 per cent to 3.9
per cent.
Sources: IMF and Norges Bank
Key rates and estimated forward ratesPer cent. 1 Jan. 2007 – 31. Dec. 20121)
0
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7
Jan.07 Jan.08 Jan.09 Jan.10 Jan.11 Jan.12
US Euro area UK
16 Dec. 2009
1 Feb. 2010
Sources: Thomson Reuters, Bloomberg and Norges Bank
18
1) Broken lines show estimated forward rates per 16 December 2009. Unbroken lines show estimated forward rates per 1 February 2010. Forward rates are based on Overnight Indexed Swap (OIS) rates. Daily figures from 1 January 2007 and quarterly figures from 1 April 2010.
The exchange rate over the past 10 yearsWeakest, strongest and average for I-44 and bilateral exchange rates
Sources: Bloomberg and Norges Bank
4
6
8
10
12
14
4
6
8
10
12
14
EURNOK USDNOK GBPNOK
Weakest the past 10 years Strongest the past 10 years
01.02.2010 Average the past 10 years
70
75
80
85
90
95
100
105
110
70
75
80
85
90
95
100
105
110
SEKNOK I-44
19
The development of the exchange rateI-44 from 1 Jan. 2007 – 1 Feb. 2010
Source: Norges Bank
80
85
90
95
100
105
110
80
85
90
95
100
105
110
2007 2008 2009 2010
Projection 2010 Q1 = 90,87
Average January 2000 - December 2009 = 94,37
LehmanBrothers Monetary policy
meetings
+0,25 +0,25
1)
1) Projection from Monetary Policy Report 3/09
20
Real exchange rates Deviation from average 1970 – 2009. Per cent. 1970 – 20101)
-20
-15
-10
-5
0
5
10
15
20
25
-20
-15
-10
-5
0
5
10
15
20
25
1970 1975 1980 1985 1990 1995 2000 2005 2010
Relative consumer prices
Relative wages
21
1) The squares show the averages for the development so far in 2010. A rising curve indicates weaker competitiveness.
Sources: Statistics Norway, Technical Reporting committee on IncomeSettlements (TRC), OECD, Ministry ofFinance and Norges Bank
Bond spreads DnB NOR Market’s projections for traded prices. 5-year maturity. Compared with swap rates. Percentage points. 3. Jan. 2007 – 27. Jan. 2010
22
Source: DnB NOR Markets
-0.5
0
0.5
1
1.5
2
2.5
3
-0.5
0
0.5
1
1.5
2
2.5
3
Jan.07 Jul.07 Jan.08 Jul.08 Jan.09 Jul.09 Jan.10
Banks
Covered bonds
Non-financials
15. Sep. 2008
17. Mar. 2008 MPR 3/099. Aug. 2007
CPI and CPIXE Actual development and projections from MPR 3/09 (dashed). 12-month growth. Per cent. January 2008 – June 2010
0
1
2
3
4
5
6
0
1
2
3
4
5
6
2008 2009 2010
CPI CPIXE
Sources: Statistics Norway and Norges Bank
23
Credit to households1)
and house price inflation12-month growth. Per cent. January 2002 – January 20102)
Credit to enterprises1)
and rise in prices for business premises3)
12-month growth. Per cent. January2002 – December 2009
-30
-20
-10
0
10
20
30
40
50
-30
-20
-10
0
10
20
30
40
50
2002 2005 2008
Prices for business premisesCredit growth
24
1) Mainland credit: c22) House prices for January. Credit growth to December3) Semi annual figures
Sources: Statistics Norway, OPAK, the real state sector(NEF, EFF, FINN.no and ECON Pöyry), OBOS and Norges Bank
2002 2005 2008
-30
-20
-10
0
10
20
30
40
50
-30
-20
-10
0
10
20
30
40
50House prices
Credit growth
Regional Network
November: the enterprises expected growth in production, but variation between sectors.
Building and construction and suppliers to the oil industry expected a fall in production six months ahead.
The activity in the traditional manufacturing sector was low, but they expected that the growth in production will remain approximately unchanged.
This picture was confirmed in a survey by phone in week 3, 2010
25
Source: Norges Bank's regional network
-3
-2
-1
0
1
2
3
4
2002 2004 2006 2008
Growth in productionAggregated. Last 3 months and 6 months ahead. Annualized. Index. Oct. 02 – Nov. 09
Petroleum investments Actual development and projections from Norwegian Petroleum Directorate. Billions. Fixed 2009-prices. 2005 - 2014
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Facilities 1)Explorations and studiesPipelands and land facilitiesProduction wells
26
Source: Norwegian Petroleum Directorate1) Purchases of goods and services to field development and fields in use
Unemployment Percentage of labour force. Seasonally adjusted. Montly and quarterly numbers. January 2002 – June 20101)
0
1
2
3
4
5
6
0
1
2
3
4
5
6
2002 2004 2006 2008 2010
LFS-unemployment
Registered unemployment
Registered unemployed and on labour market programmes
27
Sources: Statistics Norway, Norwegian Labour and Welfare Administration (NAV) and Norges Bank
1) LFS-unemployment until October 2009. Registered unemployment until January 2010. Norges Bank’s projections from 2009 Q4 –2010 2Q (dashed).
Air passengersNumber in thousands. Seasonally adjusted. January 2005 –December 2009
2400
2800
3200
3600
2005 2007 2009
28
600
650
700
750
800
2005 2007 2009
Overnight staysNumber in thousands. Seasonally adjusted. January 2005 –December 2009
Sources: AVINOR and Statistics Norway
Interest rate developments in NorwayPer cent. 3 May 2007– 1 Feb. 2010
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
May.07 Nov.07 May.08 Nov.08 May.09 Nov.09
Bank mortgage rates on new loans
3-month money market rate
Key policy rate
Sources: Norsk familieøkonomi AS and Norges Bank
29
