Executive Board meeting 4 February 2009

(1)

Executive Board meeting

4 February 2009

Difference between money market rates and expected key rates

Percentage points. 5-day moving average 1 June 2007 – 2 February 2009

3 5 4

3 mth US

3 mth Euro area 3

4 12 mth US

12 mth Euro area

1,5 2 2,5 3

3,5 3 mth Euro area

3 mth UK 3 mth Norway

1,5 2 2,5 3

3,5 12 mth Euro area

12 mth UK 12 mth Norway

0 0,5 1

Jun-07 Dec-07 Jun-08 Dec-08

0 0,5 1

Jun-07 Dec-07 Jun-08 Dec-08

2 Sources: Bloomberg, Thomson Reuters and Norges Bank

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500 500

Citigroup Bank of America

S

Price of credit default insurance

Large international banks. 5-year CDS prices. Basis points 1 January 2007 – 2 February 2009

200 300 400

200 300

400 ^UBS

HSBC DnB NOR

Royal Bank of Scotland

0 100

Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08

Source: Bloomberg

Equity markets

Indices. 1 January 2007 – 2 February 2009

140 160 140

160

40 60 80 100 120 140

Euro area Japan

0 20 40

Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Norway

Emerging economies US

4 Source: Thomson Reuters

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140 160 140

160 Spot 29.10.2008

350 400 350

400

Industrial metals Total

Oil price (Brent Blend)

USD per barrel. Daily figures January 2000 – October 2011

Commodity prices

In USD. Index

Week 1 2002 – week 5 2009

60 80 100 120 140

17.12.2008 02.02.2009

150 200 250 300 350

150 200 250 300

350 Food

0 20 40

2002 2004 2006 2008 2010

50 100 150

2002 2004 2006 2008

5 Sources: Thomson Reuters and Norges Bank

6 Source: New York Times 16.1.2009

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Manufacturing production

Volume. Seasonally adjusted. Quarterly change. Per cent 1970 Q1 – 2008 Q4

10 10

Japan UK¹⁾ Euro area¹⁾ US

-5 0 5

-15 -10

1970 1975 1980 1985 1990 1995 2000 2005

7 Source: Reuters EcoWin

1) 2008 Q4 is calculated as an average of the numbers for October and November

Growth projections for 2009

Projected by the IMF at different points in time

5 6 7

Projections October Projections November Projections January 09

0 1 2 3 4 5

-3 -2 -1

World Advanced Economies Emerging economies

8 Source: The IMF

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Fiscal measures for 2009

Fiscal stimulus in 2009 t f GDP¹⁾ as percentage of GDP¹⁾ (Estimates in Report to the Storting

no. 37)

Euro area 0.9

Germany 1.5

UK 2.6

Sweden 1.9

Denmark 2.7

9

1) Change in structural budget balance as percentage of GDP

Source: Report to the Storting no. 37 (2008-2009).

General government fiscal balances

Percentage of GDP. 2000 – 2010

2 2

-4 -2 0

Advanced economies

-8 -6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Advanced economies World

Emerging and developing economies

10 Source: IMF Staff estimates

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Developments in 5-year government bond yields

Spread between various countries and Germany. Percentage points. 1 June 2007 – 2 February 2009

3,5 4 3,5

4

Spain

The Netherlands

1 1,5 2 2,5 3

1 1,5 2 2,5

3 ^Ireland

Greece France

0 0,5 1

Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09

Actual and expected key rates

Per cent. 1 January 2003 – 2 February 2009

6 7 6

7

US Euro area Norway UK Market after previous

monetary policy meeting (17 Dec 08)

2 3 4 5

2 3 4

5 2 February 2009

0 1 0

1

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

12 Sources: Thomson Reuters and Norges Bank

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4 5 85

88 ^I-44

3-month interest rate differential

and import-weighted exchange rate (I-44) ¹⁾

January 2002 – December 2011

0 1 2 3 4 88

91 94 97 100

I 44 (left-hand scale)

2 February 2009 2 February 2009

13

-2 -1 0 100

103 106

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Sources: Thomson Reuters og Norges Bank Weighted interest rate differential

(right-hand scale)

17 December 2008

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

11 12

EURNOK sample space for NOK exchange rate ahead

Based on 1-month currency option prices. Per cent 3 January 2008 – 2 February 2009

8,63

9 10 11

12 September 2008

7,65

7 8

Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10

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11 12

EURNOK sample space for NOK exchange rate ahead

Based on 1-month currency option prices. Per cent 3 January 2008 – 2 February 2009

8,63

10,35

9 10 11

2 February 2009

12 September 2008

7,65 7,71

7 8

Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10

CPI and CPIXE ¹⁾

12-month change. Per cent. January 2006 – December 2008

5 6 5

6

CPI CPIXE

1 2 3 4

16 Sources: Statistics Norway and Norges Bank

-1 0 -1

0

2006 2007 2008 2009

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

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CPI-ATE

¹⁾

Total and by supplier sector

²⁾

. 12-month change. Per cent January 2004 – December 2008

4 5 6 4

5 6

-2 -1 0 1 2 3

-2 -1 0 1 2

3 Domestically produced goods and services (0.7)

Imported consumer goods (0.3)

CPI-ATE

17

-5 -4 -3 -5

-4 -3

2004 2005 2006 2007 2008 2009

Sources: Statistics Norway and Norges Bank

1)CPI adjusted for tax changes and energy products.

2)Norges Bank’s estimates.

Employment (LFS)

In 1000s. Seasonally adjusted. January 2007 – November 2008

2550 2550

2400 2450 2500

2350 2400

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

18 Source: Statistics Norway

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Unemployment

LFS unemployment, registered unemployed, and registered unemployed and on labour market programmes

Per cent. Seasonally adjusted. February 1997 – November 2008

10

10 LFS unemployment

4 6 8

4 6

8 Registered unemployed and on labour

market programmes Registered unemployed

0 2 0

2

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

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

Index of commodity consumption

Volume. January 2004 = 100. Seasonally adjusted January 2004 – December 2008

130 140 130

140

100 110 120

80 90 80

90

Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

Sources: Statistics Norway and Norges Bank

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Industrial confidence indicator ¹⁾

Seasonally adjusted diffusion index. 1988 Q1 – 2008 Q4

20 20

-10 0 10

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 -30 -20 -30

-20

21 Source: Statistics Norway

1)Based on production expectations, stocks of finished goods and total stocks of orders

House prices and credit to households

12-month change. Per cent. January 2001 – January 2009

20 25 20

25

14 16 14

House prices

16

Credit to households (C2)

0 5 10 15 20

4 6 8 10 12 14

22

-10 -5 -10

-5

2001 2003 2005 2007 2009

0 2 4

2001 2003 2005 2007

Sources: Norwegian Association of Real Estate Agents, Assosiation of Real Estate Agency Firms, FINN.no, ECON Pöyry and Norges Bank

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Market prices for commercial property and corporate debt

Annual rise in market prices and twelve-month change in debt. Per cent January 2001 – December 2008

60

60 30 30

Market prices for commercial property

¹⁾

Corporate debt

0 10 20 30 40 50

5 10 15 20 25

23

-30 -20 -10

2001 2003 2005 2007

-5 0 5

2001 2003 2005 2007

Sources: Statistics Norway, OPAK and Norges Bank

1) High-standard offices centrally located in Oslo.

Change in credit standards for loans to households

Per cent

80 100 80

100

Factors affecting credit standards

60 -40 -20 0 20 40 60

60 -40 -20 0 20 40

60 Credit standards

Economic outlook Banks’ appetite

for risk Default

08 Q3

08 Q4

09 Q1

08 Q3

08 Q4

09 Q1

08 Q3

08 Q4

09 Q1

08 Q3

08 Q4

09 Q1

-100 -80 -60 -100

-80 -60

24 Source: Norges Bank

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80 100 80

100

Factors affecting credit standards

Change in credit standards for non-financial corporations

Per cent

60 -40 -20 0 20 40 60

Economic outlook

Banks’ appetite for risk Capital-

adequacy

Funding Credit standards

08 Q3

08 Q4

09 Q1

08 Q3

08 Q4

09 Q1

08 Q4

09 Q1

08 Q3

08 Q4

09 Q1

08 Q3

08 Q4

09 Q1

-100 -80 -60 -100

-80 -60

25 Source: Norges Bank

The Government’s stimulus package

• NOK 20 bn stimulus package

•

Increased expenditure (NOK 16 75 bn)

•

Increased expenditure (NOK 16.75 bn)

• local government

• transport and communications projects

• other building projects

•

Tax cuts for the business sector (NOK 3.25 bn)

•

Expansion of lending guarantee and investment schemes

•

Expansion of lending, guarantee and investment schemes (NOK 8 bn)

26

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Expected real return on the Government Pension Fund – Global and structural non-oil deficit

In billions of 2009-NOK. 2001 – 2009

120 140 120

140

Structural deficit, stimulus package 2009

40 60 80 100 120

40 60 80 100

120 Structural non-oil deficit 4 pct. real return

0 20

0

0 20 0

2001 2002 2003 2004 2005 2006 2007 2008 2009

27 Sources: National Budget for 2009 and Report to the Storting no. 37 (2008-2009).

Costs of money market funding and long- term funding

Per cent. Weekly figures. 3 January 2007 – 29 January 2009

12 12

Premium on long-term funding (5-year bank bond)

1)

4 6 8 10

4 6 8

10 Difference between 3-month money market rate and key policy rate Key policy rate

1)

0 2 0

2

28

1)Effective 3-month NIBOR Sources: DnB NOR Markets and Norges Bank

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Key policy rate, money market rate ¹⁾ and banks’ weighted lending rate on new loans ²⁾

Per cent. 1 June 2007 – 2 February 2009

8 9 8

9

Money market rate

M t t

3 4 5 6 7 8

3 4 5 6 7

8 Mortgage rate

Key policy rate

0 1 2

29

1)3-month NIBOR.

2)Interest rates on new mortgage loans of NOK 1m within 60% of purchase price with variable interest rate. Figures for the 20 largest banks, weighted according to market share.

Sources: Norsk familieøkonomi AS and Norges Bank

8 9 8

9

Key policy rate

Actual developments, projection and strategy interval. Per cent

3 4 5 6 7

3/041/05

2/05 3/051/06 2/063/06

2/07 1/07

3/071/082/08 3/08

Strategy interval: 2 – 3 per cent

0 1 2

2005 2006 2007 2008 2009 2010 2011

30 3/0

Source: Norges Bank Projection

17 December 2008

Executive Board meeting 4 February 2009