Executive Board meeting 24 September 2008

Norges Bank

1

Executive Board meeting24 September 2008

Norges Bank

Financial incidents

• Bear Stearns, 17 March

• Roskilde Bank, 24 August

• Fannie Mae and Freddie Mac, 7 September

• Merrill Lynch, 14 September

• Lehman Brothers, 14 September

• AIG, 17 September

• HBOS, 17 September

Norges Bank

Source: Bloomberg

0

100

200

300

400

Jul-07 Oct-07 Jan-08 Apr-08 Jul-08

JPMorgan Chase Citigroup

CDS prices for selected banksBasis points. 2 July 2007 – 22 September 2008

Bank of America

DnB NOR

UBS

iTraxx Europe index

Norges Bank

2

3

4

5

6

7

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

2

3

4

5

6

7

Sources: Bloomberg and Reuters EcoWin

UK

Germany

Effective yields on covered bonds 5-7 years average term to maturity. Percentage points

5 January 2004 – 19 September 2008

Spain

Denmark

IrelandNorway1)

1) The regulation relating to covered bonds entered into force on 01.06.07

Norges Bank

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Jul-07 Jan-08 Jul-08

3-month US3-month UK3-month Norway3-month Euro area

Jul-07 Jan-08 Jul-08

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

12-month US12-month UK12-month Norway12-month Euro area

Difference between money market rates and expected key rates1)

Percentage points. 5-day moving average 2 July 2007 – 22 September 2008

Sources: Bloomberg, Thomson Reuters and Norges Bank

1) The expected key rate is measured by the Overnight Indexed Swap (OIS). For Norway, the estimates are based on key policy rate expectations in the market.

Norges Bank

60

70

80

90

100

110

120

130

Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08

60

70

80

90

100

110

120

130

EquitiesIndices, 1 July 2007 = 100. 1 July 2007 – 22 September 2008

Source: Thomson Reuters

US, S&P 500

Emerging markets

Norway, OSEBX

Europe Stoxx

Japan, Topix

Norges Bank

Implied volatility from equity options 1 January 2005 – 19 September 2008

0

10

20

30

40

Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08

0

10

20

30

40

Sources: Reuters EcoWin and Oslo Stock Exchange

Europe

Norway

US

Norges Bank

Global Risk Index Expected volatility between USD, EUR and JPY in per cent1)


0%

5%

10%

15%

20%

Jan-05 Jan-06 Jan-07 Jan-08

0%

5%

10%

15%

20%

Source: Bloomberg1) GRI is based on implied volatility derived from prices on 3-month

currency options between EUR, USD and JPY (equally weighted)

Norges Bank

Implied volatility in the Norwegian exchange marketBased on 1-month currency option prices


2

4

6

8

10

12

14

16

18

20


2

4

6

8

10

12

14

16

18

20

Source: Bloomberg

Volatility EURNOK

Volatility USDNOK

Norges Bank

85

88

91

94

97

100

103

2002 2003 2004 2005 2006 2007 2008 2009 2010

-1

0

1

2

3

4

5

25 June 2008

22 September 2008

23 September 2008

3-month interest rate differential and import-weighted exchange rate (I-44)1)

January 2002 – December 2010

Weighted interest ratedifferential (left-hand scale)

I-44 (right-hand scale)

Sources: Reuters and Norges Bank

1) A rising curve denotes an appreciation of the krone.

Norges Bank

Growth forecasts Consensus ForecastsGDP. Percentage change on previous year

0

1

2

3

4

5

6

7

8

9

10

11

US Euro UK China 26 TP India

June

September

0

1

2

3

4

5

6

7

8

9

10

11

US Euro UK China 26 TP India

June

September

2008 2009

Source: Consensus Forecasts

Norges Bank

0

20

40

60

80

100

120

140

160

2002 2004 2006 2008 2010

0

20

40

60

80

100

120

140

160

0

50

100

150

200

250

300

350

2002 2004 2006 2008

0

50

100

150

200

250

300

350Industrials

Metals

Non-foodagriculturalsFood

All items

Oil price (Brent Blend)in USD per barrel

Futures prices (broken lines)

1) In XDR Sources: Thomson Reuters and Norges Bank

20.06.08 (MPR 2/08)

International commodity prices1)

Index. Week 1 2002 = 100 Week 1 2002 – week 38 2008

22.09.08

Norges Bank

Consumer prices abroad12-month change. Per cent. January 2002 – August 2008

-5

0

5

10

15

20


-5

0

5

10

15

20

UK

Euro area

US

Japan

Sweden

Source: Thomson Reuters

-5

0

5

10

15

20


-5

0

5

10

15

20Russia

Brazil

India1)

China

1) Wholesale prices

Norges Bank

0

1

2

3

4

5

6

7

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

0

1

2

3

4

5

6

7

Sources: Thomson Reuters and Norges Bank

Policy rates and estimated forward rates Per cent. 2 January 2005 – 22 September 2008

US

Euro area

22 September 2008

Market after MPR 2/08 (25 June)

Sweden

UK

Norges Bank

15

-2.5

0

2.5

5

2002 2003 2004 2005 2006 2007 2008

-2.5

0

2.5

5

CPI

CPIXE1)

1) CPIXE: CPI adjusted for tax changes and excluding temporary changes in energy prices

Consumer prices 12-month change. Per cent. January 2002 – July 2008

Sources: Statistics Norway and Norges Bank

Norges Bank

0

1

2

3

4

5

6

7

8


0

1

2

3

4

5

6

7

8

QNA Q2

Mainland GDP – half-year figures Change from previous half year. Per cent. Annual rate. 2005 Q1 – 2008 Q2

MPR 2/08


Norges Bank

Hourly productivity, mainland Norway 4-quarter change. 5-quarter moving average. Per cent. 1997 Q1 – 2008 Q2

0

1

2

3

4

5

1997 1999 2001 2003 2005 2007

0

1

2

3

4

5

Average

1997 Q1 – 2008 Q2


Norges Bank

18

10

15

20

25

30

2002 2003 2004 2005 2006 2007 2008

Fixed investment in oil extraction and pipeline transport

NOK billion. Seasonally adjusted figures. 2002 Q1 – 2008 Q2

Source: Statistics Norway

Norges Bank

0

10

20

30

40

50

60

70


0

10

20

30

40

50

60

70Capacity1)

Labour2)

Source: Norges Bank

Norges Bank's regional network: capacity constraints Per cent. January 2005 – August 2008

1) Share reporting that they would have some or considerable difficulty in accommodating an increase in demand.2) Share who respond that the supply of labour will be a limiting factor for output/turnover.

Norges Bank

Expected change in selling prices over the next 12 months. Diffusion index¹)

30

35

40

45

50

55

60

65


30

35

40

45

50

55

60

65

1) Share reporting higher prices + (0.5 * share reporting unchanged prices)

Retail trade and services to the household sector

Manufacturing, building and construction and corporate services

Source: Norges Bank

Norges Bank

Retail trade componentsJanuary 2004 = 100. Volume. Seasonally adjusted.

January 2004 – July 2008

80

90

100

110

120

130

140

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

80

90

100

110

120

130

140

Other goods

Food, beverages and tobacco

Sale of motor vehicles and automotive fuel

Electricity and fuel

Total


Norges Bank

Unemployed Percentage of labour force. Seasonally adjusted.

January 1998 – August 2008

1

2

3

4

5

6

1998 2000 2002 2004 2006 2008

1

2

3

4

5

6

Registered unemployed and on labour market programmes

LFS unemployment

Registered unemployed

Sources: Statistics Norway, Norwegian Labour and Welfare Administration (NAV) and Norges Bank

Norges Bank

2200

2250

2300

2350

2400

2450

2500

2550

2600

2650

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

2200

2250

2300

2350

2400

2450

2500

2550

2600

2650

EmploymentFigures from LFS and QNA. 1000 persons

Monthly and quarterly figures. February 1998 – June 2008

LFS

QNA


Norges Bank

Labour migration In thousands. January 2006 – August 2008

0

20

40

60

80

100

120

Jan-06 Jan-07 Jan-08

0

20

40

60

80

100

120

Registered foreign employees from new EEA countries (SSU)

Registered work permits (UDI)

Sources: Central Office – Foreign Tax Affairs (SSU), Norwegian Directorate of Immigration (UDI) and Norges Bank

Registered work permits – new EEA countries (UDI)

Norges Bank

0

5

10

15

20

25

30

Jan-07 Jul-07 Jan-08 Jul-08

0

5

10

15

20

25

30

Sources: Central Office – Foreign Tax Affairs (SSU), Norwegian Directorate of Immigration (UDI) and Norges Bank

Labour migration 12-month change. January 2007 – August 2008

Registered foreign employees from new EEA countries (SSU)

Registered work permits (UDI)

Registered work permits – new EEA countries (UDI)

Norges Bank

Housing investment and order reserves housing construction

2000 Q1 – 2008 Q2

12000

14000

16000

18000

20000

22000

24000

26000

2002 2003 2004 2005 2006 2007 2008

70

90

110

130

150

170

190

210

1) Measured at constant 2005-prices, mill. NOK. Seasonally adjusted 2) Deflated by the building construction index

Housing investment1), (left-hand scale)

Order reserves housing construction (volume2)), (right-hand scale)


Norges Bank

0

100

200

300

400

500

600

700

800

900

2002 2003 2004 2005 2006 2007 2008

0

100

200

300

400

500

600

700

800

900

Building starts In 1000 m2. Trend. January 2002 – July 2008

Other buildings

Dwellings


Norges Bank

-10

-5

0

5

10

15

20

25

30

35

40

45

50

2002 2003 2004 2005 2006 2007 2008

-10

-5

0

5

10

15

20

25

30

35

40

45

50

2002 2003 2004 2005 2006 2007 2008

Property prices and creditGrowth from same month/half-year previous year. Per cent.

Households

House prices

Credit

Enterprises

Commercial property prices

Credit

Sources: Norwegian Association of Real Estate Agents, Association of Real Estate Agency Firms, Finn.no, ECON Pöyry, Statistics Norway and Norges Bank

Norges Bank

Sources: Bloomberg, Thomson Reuters, DnB NOR Markets and Norges Bank

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6


-0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

Bank bonds

Long-term financingIndicative credit spreads for Norwegian bonds. 5 years to maturity. Difference to

swap rates. Percentage points. Weekly figures. 2 July 2007 – 17 Sep. 2008

Covered bonds

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6


0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

12-month rate

3-month rate

Short-term financingDifference between money market rates and

expected key policy rate in Norway. Percentage points. 5-day moving average.

2 July 2007 – 17 Sep. 2008

More expensive financing

Norges Bank

30

Key policy rate, money market rate1) and banks’ lending rate on new loans2)

Per cent. 1 July 2007 – 22 September 2008

Sources: Norsk familieøkonomi AS and Norges Bank

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5Mortgage rate

Money market rate

Key policy rate

1) 3-month NIBOR.2) Interest rates on new mortgage loans of 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

Key policy rate in the baseline scenario and estimated forward rates

Per cent. 2008 Q4 – 2010 Q4

Sources: Thomson Reuters and Norges Bank

4.0

5.0

6.0

7.0

2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4

4.0

5.0

6.0

7.0

Market 22 September 2008

Market after publication of MPR 2/08 (25 June)

Baseline scenario MPR 2/08

Norges Bank

32

Key policy rate

Source: Norges Bank

0

1

2

3

4

5

6

7

8

9

2005 2006 2007 2008 2009 2010 2011

0

1

2

3

4

5

6

7

8

9

Strategy interval

1/053/04

2/053/05 1/06

2/063/06

2/071/07

3/07MPR 2/081/08

2/08

Documents

Executive Board meeting 24 September 2008