Executive Board Meeting

(1)

Executive Board Meeting

26 January 2011

(2)

0 1 2 3 4 5 6

26 TP US Euro area

MPR 3/10

IMF WEO Oct 2010 CF Jan 2011

IMF WEO update Jan 2011

0 1 2 3 4 5 6

26 TP US Euro area

MPR 3/10

IMF WEO Oct 2010 CF Jan 2011

IMF WEO update Jan 2011

Sources: IMF, OECD and Consensus Economics

Growth projections for 2010

Change from previous year. Per cent

Growth projections for 2011

Change from previous year. Per cent

(3)

Manufacturing output in growth economies

12-month change. Per cent. January 2002 – December 2010

BRIC

-30 -20 -10 0 10 20 30 40

2002 2005 2008

China Brazil Russia India

Mexico, South Korea, Indonesia and Turkey

-30 -20 -10 0 10 20 30 40

2002 2005 2008

Mexico South Korea Indonesia Turkey

Source: Thomson Reuters

(4)

Budget deficit, public debt, current account, banks’

balance sheets and cost level in 2010

In per cent of country’s GDP. 2010

Budget balance

¹⁾

Public debt

¹⁾

Current account

Banks’

balance sheets 2009

Cost level

²⁾

Greece -9.6 140.2 -10.6 240 119.2

Portugal -7.3 82.8 -10.7 310 119.6

Spain -9.3 64.4 -4.8 350 121.7

Italy -5.0 118.9 -3.2 250 119.8

Ireland -32.3 (-13.2)

³

97.4 -1.1 820 98.8

Belgium -4.8 98.6 1.7 340 120.5

Source: European Commission 1) Public sector as defined in ESA95 (Maastricht): Central, regional and municipal governments are included

Budget balance is net borrowing in public sector. Government debt equals nominal value of gross debt in public sector at year-end

2) Unit labour costs (ULC), relative to Germany in 2010. Germany = 100. Index. Start year = 2000 3) Excluding bank rescue package

(5)

0 20 40 60 80 100 120 140 160

2002 2005 2008 2011

Oil price

Petroleum price ¹⁾

Gas price

Sources: Thomson Reuters, Statistics Norway and Norges Bank

Commodity prices

Index. Week 1 2002 = 100.

USD. Jan 2002 – Jan 2011

Oil, gas and petroleum export prices ¹⁾

USD/barrel. Jan 2002 – Dec 2010

1) Weighted average of export prices for oil and gas 2) The Economist commodity price index

0 100 200 300 400 500 600 700 800

2002 2005 2008 2011

Metals ²⁾

Food ² ⁾

Aluminium

Copper

Cotton

(6)

Global equity prices

Index. 1 January 2010 = 100.

1 January 2010 – 24 January 2011

80 90 100 110 120 130

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11

US S&P 500 Europe STOXX Japan Topix

Emerging market economies MSCI Norway OSEBX

MPR 3/10

(7)

Unemployment

Per cent. Seasonally adjusted. January 2005 – November 2010 Scandinavia, Germany and the US

¹⁾

0 5 10 15 20 25

2005 2007 2009

Norway Sweden Denmark Germany US

PIIGS countries and Belgium

²⁾

0 5 10 15 20 25

2005 2007 2009

Spain Italy Ireland Portugal Greece Belgium

Source: Thomson Reuters 1) Norway to end-October and US to end-December 2010

2) Greece to end-October 2010

(8)

Yield spread over German 10-year government bonds

Percentage points. 1 July 2008 – 24 January 2011

0 2 4 6 8 10

Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11

Portugal Spain Ireland Greece Italy Belgium MPR 3/10

Source: Bloomberg

(9)

Government debt maturing each year

Billions of euro

Portugal Spain

0 5 10 15 20 25 30 35

2011 2016 2021 2026 2031 2036 2041 Interest

Principal¹ ⁾

0 20 40 60 80 100 120 140 160

2011 2016 2021 2026 2031 2036 2041 Interest

Principal¹ ⁾

Source: Bloomberg 1) Blue columns show debt maturing each year. Outstanding debt is the sum of the blue colums.

(10)

CDS premiums

iTraxx Senior Financials and Nordic banks. Percentage points 1 January 2007 – 24 January 2011

0 0.5 1 1.5 2 2.5

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

iTraxx

Danske Bank DnB NOR Nordea

Source: Bloomberg

(11)

Inflation and inflation expectations in the US

Per cent. January 2007 - December 2010/ January 2011

¹⁾

Inflation

-2 0 2 4 6

2007 2008 2009 2010 2011

CPI²⁾

Core CPI²⁾

Expected inflation

Source: Thomson Reuters 1) Actual inflation to December and expected inflation to January.

2) 12-month change

3) Inflation expectations survey

-2 0 2 4 6

2007 2008 2009 2010 2011

University of Michigan 5-year³⁾

Break-even inflation, 5-year 5 years ahead

Inflation swap, 5-year 5 years ahead

(12)

Inflation

12-month change. Per cent. January 2007 - December 2010 Euro area, UK and Sweden

-2 0 2 4 6

2007 2008 2009 2010

Euro area UK

Sweden

BRIC

-4 0 4 8 12 16

2007 2008 2009 2010

China Brazil Russia India

(13)

Actual and expected key rates ¹⁾

Per cent. 1 January 2007 – 31 December 2013

²⁾

0 1 2 3 4 5 6 7

2007 2008 2009 2010 2011 2012 2013

US UK

Euro area

MPR 3/10

24 January 2011

Sources: Bloomberg and Norges Bank 1) Expected interest rates are based on Overnight Indexed Swap (OIS) rates

2) Daily figures from 1 January 2007 and quarterly figures as at 24 January 2010 3) EONIA in euro area

(14)

Forward interest rates among trading partners

Per cent. January 2011 – October 2020

0 1 2 3 4 5

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Market 21 October MPR 3/10

Market 24 January

Sources: Bloomberg, Thomson Reuters and Norges Bank

(15)

Import-weighted krone exchange rate (I-44) ¹⁾

Daily- (historical) and quarterly figures (projected) January 2009 – September 2011

85

90

95

100 105 85

90

95

100

105 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

I-44

Projections MPR 3/10

Source: Norges Bank 1) A rising curve denotes a stronger krone exchange rate

(16)

CPI, CPI-ATE ¹⁾ and CPIXE ²⁾

Projections from MPR 3/10 (broken lines). 12-month change. Per cent.

January 2008 – June 2011

0 1 2 3 4 5 6

2008 2009 2010 2011

CPI

CPI-ATE CPIXE

Sources: Statistics Norway and Norges Bank 1) CPI adjusted for tax changes and excluding energy products

2) CPI adjusted for tax changes and excluding temporary changes in energy prices. Real time data. See Staff Memo 2008/1 and 2009/3 from Norges Bank for a description of the CPIXE

(17)

Projections for CPI-ATE ¹⁾

Projections from SAM

²⁾

given at different points in time with fan chart from MPR 3/10. Four-quarter change. Per cent

0 1 2 3 4

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

SAM in MPR 3/10

SAM 15 December 2010 SAM 26 January 2011

Sources: Statistics Norway and Norges Bank

90%

70%

50%

30%

1) CPI adjusted for tax changes and excluding energy products

2) System for Averaging Models. For more information about SAM and the projections see www.norges-bank.no

(18)

Household spending on services and regional network

Quarterly growth. Seasonally adjusted. Output growth for household services past 3 months, from regional network.

-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5

2002 2003 2004 2005 2006 2007 2008 2009 2010

Regional network

Spending on services (Quarterly National Accounts)

(19)

Norges Bank’s regional network

Survey by phone January 2011

 Growth in activity since November in line with expectations overall

 Lower than expected in retail trade and higher than expected in building and construction (especially residential)

 Growth expectations revised up somewhat since November

 Improved prospects for building and construction and services

 Employment growth since November in line with expectations

 Capacity utilisation as projected, with generally

ample supply of labour

(20)

Projections for mainland GDP growth

Projections from SAM

¹⁾

given at different points in time with fan chart from MPR 3/10. Four-quarter change. Per cent

-3 -2 -1 0 1 2 3 4 5 6

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

SAM in MPR 3/10

SAM 15 December 2010 SAM 26 January 2011

90%

70%

50%

30%

1) System for Averaging Models. For more information about SAM and the projections, see www.norges-bank.no

(21)

Credit growth and property prices

12-month change. Per cent. January 2002 – December 2010 Credit to households

¹⁾

and house

prices

²⁾

2002 2005 2008 2011 -15 -10 -5 0 5 10 15 20 25

-15 -10 -5 0 5 10 15 20 25

House prices

Credit to households

Credit to enterprises

¹⁾

and commercial property prices

³⁾

-30 -20 -10 0 10 20 30 40 50

2002 2005 2008 2011

Commercial property selling prices

Credit to enterprises

1) Households; C2, Enterprises; C3, mainland Norway 2) House prices to December. Credit growth to November 3) Semiannual figures to end of 2010. Credit growth to October

Sources: Statistics Norway, OPAK, the real estate sector (NEF, EFF, FINN.no and ECON Pöyry), OBOS and Norges Bank

(22)

Source: Norges Bank

Credit demand, non-financial corporations and households

Per cent. 2010 Q1 – 2010 Q4

-50 -40 -30 -20 -10 0 10 20 30 40 50

10 Q3 10 Q4 11 Q1 10 Q2 10 Q3

Actual credit demand Expected credit demand

Non-financial corporations Households

(23)

Risk premium on bank bonds and covered bonds

Compared with swap rates. 5- year. Per cent. July 2007 – January 2011

-0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11

Smaller banks with high rating DnB NOR Bank

Covered bonds

Source: DnB NOR Markets

(24)

Norges Bank’s interest rate path and market interest rate expectations

Per cent. 1 January 2011 – 1 October 2013

1 2 3 4 5

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13

Market 24 January Market 27 October MPR 3/10 (27 October)

Sources: Bloomberg, Thomson Reuters and Norges Bank

(25)

Norges Bank’s key policy rate

Per cent. 2008 Q1 – 2013 Q4

0 1 2 3 4 5 6 7 8 9

2008 2009 2010 2011 2012 2013

Strategy interval Baseline scenario

Source: Norges Bank

90%

70%

50%

30%

(26)

Executive Board Meeting