Norges Bank (Central Bank of Norway)
1
Executive Board meeting26 April 2006
Norges Bank (Central Bank of Norway)
2
Monetary Policy Strategy - Inflation Report 1/06
• The Executive Board's assessment is that the sight deposit rate should be in the interval 2¼ - 3¼ per cent in the period to the publication of the next Inflation Report on 29 June 2005, conditional on economic developments that are broadly in line with the projections.
• The interest rate may gradually – in small, not too frequent steps – be brought back towards a more normal level. The objective of bringing inflation back to target and anchoring inflation expectations nevertheless implies that monetary policy remains expansionary.
Norges Bank (Central Bank of Norway)
3
Growth projections for 2006 and 2007Projections for GDP growth published by the IMF in September 2005 and
April 2006. Per cent
0
2
4
6
8
10
Global US Euro area China Japan
2006 (September 2005)2006 (April 2006)2007 (September 2005)2007 (April 2006)
Source: IMF World Economic Outlook April 2006
Norges Bank (Central Bank of Norway)
4
Developments on stock markets internationally 2 January 2002 = 100. 2 January 2002 – 24 April 2006
25
75
125
175
225
2002 2003 2004 2005 200625
75
125
175
225Wilshire 5000, USFTSE, UKDAX, GermanyTopic, JapanOslo Stock Exchange, all-shareOMXS, Sweden
Source: EcoWin
Norges Bank (Central Bank of Norway)
5
Oil price Brent Blend and futures prices USD per barrel. 3 January 2002 – 24 April 2006
10
20
30
40
50
60
70
80
2002 2003 2004 2005 2006 2007 200810
20
30
40
50
60
70
80
24 April 2006
Sources: Norges Bank and EcoWin
10 March IR 1/06
Norges Bank (Central Bank of Norway)
6
20
30
40
50
60
70
80
2004 2005 200620
30
40
50
60
70
80
Oil futures pricesUSD per barrel light crude. 3 January 2004 – 24 April 2006
Delivery in 6 years
Delivery in 1 month
Sources: EcoWin/ NYMEX
Norges Bank (Central Bank of Norway)
7
Metal pricesIndex. Week 1, 2001 = 100
50
100
150
200
250
300
350
400
Jan 01 Jul 01 Jan 02 Jul 02 Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 0650
100
150
200
250
300
350
400
Copper
Steel
Nickel
Aluminium
Zinc
USD USD
Source: EcoWin
Norges Bank (Central Bank of Norway)
8
Core inflation1)
12-month change. January 2002 – March 2006
-2
-1
0
1
2
3
4
2002 2003 2004 2005 2006-2
-1
0
1
2
3
4
US
Japan
Euro area
UK
Source: EcoWin\Eurostat
1) US: CPI excl. food and energy, Japan: CPI excl. fresh food Euro area, UK and Sweden: CPI excl. energy, food, alcohol and tobacco
Sweden
Norges Bank (Central Bank of Norway)
9
Actual and expected key rates1)
0
1
2
3
4
5
6
Aug 03 Aug 04 Aug 05 Aug 06 Aug 07 Aug 08 Aug 090
1
2
3
4
5
6
Sources: Reuters and Norges Bank
US
Euro area24 April 2006
15 March 2006
Sweden
UK
1) Not adjusted for credit risk
Norges Bank (Central Bank of Norway)
10
Yields on 10-year government bonds 2 January 2004 – 25 April 2006
0
2
4
6
8
2004 2005 20060
2
4
6
8
Germany
US
Japan
Sources: EcoWin and Norges Bank
Norway
Norges Bank (Central Bank of Norway)
11
3-month interest rate differential and import-weighted exchange rate (I-44) 1)
January 2002 – December 2009
-1
0
1
2
3
4
5
2002 2003 2004 2005 2006 2007 2008 2009
85
88
91
94
97
100
103
Sources: Bloomberg and Norges Bank
I-44, (right-hand scale)
Weighted 3-month interest
rate differential (left-hand scale)
15 March 2006
24 April 2006
1) A rising curve denotes an appreciation of the krone.
Average 3 - 25 April
Norges Bank (Central Bank of Norway)
12
Inflation12-month change. Per cent. January 2002 - March 2006
-2
0
2
4
6
2002 2003 2004 2005 2006-2
0
2
4
6
Sources: Statistics Norway and Norges Bank
Weighted median
CPI-ATE1)CPI
1)A further adjustment is made for the estimated effect of reduced maximum day-care rates from January 2006.
Norges Bank (Central Bank of Norway)
13
-5
-4
-3
-2
-1
0
1
2
3
Jan 04 May 04 Sep 04 Jan 05 May 05 Sep 05 Jan 06 May 06-5
-4
-3
-2
-1
0
1
2
3
Sources: Statistics Norway and Norges Bank
Goods and services produced in Norway
Imported consumer goods
CPI-ATE
CPI-ATE 1)
Total and by supplier sector2). Actual inflation and projections from IR 1/06 12-month change. Per cent. January 2004 - May 2006
1)A further adjustment is made for the estimated effect of reduced maximum day-care rates from January 2006. 2) Norges Bank's calculations
Norges Bank (Central Bank of Norway)
14
Change in prices for food and non-alcoholic beverages Excluding taxes. 12-month change. Per cent.
January 2004 – March 2006
-2
0
2
4
6
Jan 04 Jul 04 Jan 05 Jul 05 Jan 06-2
0
2
4
6
Source: Statistics Norway
Norges Bank (Central Bank of Norway)
15
Mainland GDP, excluding energyPercentage growth in volume on previous quarter. Seasonally adjusted
Basis value. 2000 Q1 - 2005 Q4
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2000 2001 2002 2003 2004 2005-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Sources: Statistics Norway and Norges Bank
Norges Bank (Central Bank of Norway)
16
Number of unemployed (LFS), registered unemployed and persons on labour market programmes
In thousands. Seasonally adjusted. January 1996 – March 2006
0
25
50
75
100
125
150
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20060
25
50
75
100
125
150
LFS unemploymentRegistered unemployed and on labour market programmes
Registered unemployed
Sources: Statistics Norway and the Directorate of Labour
Norges Bank (Central Bank of Norway)
17
Expected earnings in listed companies Index. 01.01.2006 = 100
50
60
70
80
90
100
110
Jan 04 Jul 04 Jan 05 Jul 05 Jan 06
Sources: Reuters and EcoWin
2006 2007
Jan 05 Jul 05 Jan 0650
60
70
80
90
100
110
Norway
Japan
Europe
US
Norway
Japan
Europe
US
Norges Bank (Central Bank of Norway)
18
House prices (12-month change) and housing starts (number of 1000s in last 12-months). January 2001 – March 2006
Sources: Statistics Norway, Norwegian Association of Real Estate Agents (NEF), Association of Real Estate Agency Firms (EFF), ECON and Finn.no
-10
-5
0
5
10
15
20
25
30
35
2001 2002 2003 2004 2005 2006-10
-5
0
5
10
15
20
25
30
35
House prices
Housing starts
Norges Bank (Central Bank of Norway)
19
Credit growthTotal debt mainland Norway (C3). Domestic credit to households (C2)
12-month growth. Per cent
-5
0
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005 2006-5
0
5
10
15
20
25
30
Source: Norges Bank
Households
Total debt of mainland enterprises
Total debt
Norges Bank (Central Bank of Norway)
20
0
1
2
3
4
5
6
2006 2007 2008 20090
1
2
3
4
5
6
Sight deposit rate in baseline scenario and market expectations regarding the sight deposit rate1)
Per cent. 2006 Q2 – 2009 Q4
1) Derived from estimated forward rates. The sight deposit rate has been reduced by a credit risk premium and technical difference of 0.20 percentage point. The grey shaded interval shows the highest and lowest interest rates in the market's sight deposit rate scenario in the period 6 – 24 April. 06
Source: Norges Bank
Baseline scenario
Market expectations concerning the sight deposit rate
Market 24 April 2006
Norges Bank (Central Bank of Norway)
21
Sight deposit rate in baseline scenario from Inflation Report 1/06 with fan chartPer cent. Quarterly figures. 2004 Q1– 2009 Q4
0
1
2
3
4
5
6
7
8
2004 2005 2006 2007 2008 20090
1
2
3
4
5
6
7
830% 50% 70% 90%
Source: Norges Bank