THE CONDUCT OF MONETARY POLICY
GOVERNOR ØYSTEIN OLSEN
19 May 2020A historically deep decline
Growth in mainland GDP.
1)Percent
1) Projections for 2020 from Monetary Policy Update, May 2020. 2
Sources: Staistics Norway and Norges Bank
-12 -10 -8 -6 -4 -2 0
1921 1931 1940 1944 1989 2009 2020
Abrupt and deep decline in the global economy
80 85 90 95 100 105 110 115
2014 2016 2018 2020 2022
Projections monetary policy meeting 6 May Projections 11 March
GDP trading partners.
1)Index. 2019 Q1 = 100
1) Projections from Monetary Policy Report 1/20 and Monetary Policy Update, May 2020. 3
Sources: Refinitiv Datastream and Norges Bank
Marked fall in oil prices
USD per barrel. Futures price at 15 May 2020
Source: Refinitiv Datastream 4
0 10 20 30 40 50 60 70 80 90
2018 2019 2020 2021 2022 2023
Spot price Futures price
Substantial krone depreciation
100 105 110 115 120 125 130 135
Jan-18 Jul-18 Jan-19 Jul-19 Jan-20
Import-weighted exchange rate index (I-44)
Source: Norges Bank 5
Money market turbulence
Money market rate (three-month Nibor) and policy rate. Percentage points
6
0.0 0.5 1.0 1.5 2.0 2.5 3.0
Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20
Policy rate
Money market rate
Sources: Bloomberg og Norges Bank
Policy rate reduced to zero
Monetary policy meeting, 6 May Norges Bank’s policy rate
The outlook and the balance of risks imply a very expansionary monetary policy stance
The policy rate is reduced to zero percent and will most likely remain at today’s level for some time ahead
The Committee does not envisage making further policy rate cuts
7
0 0.5 1 1.5 2
2012 2014 2016 2018 2020
Source: Norges Bank
Activity will pick up gradually
600 650 700 750 800
2012 2014 2016 2018 2020 2022
Projections monetary policy meeting 6 May Projections 11 March
Quarterly mainland GDP.
1)In billions of NOK
1) Projections from Monetary Policy Report 1/20 and Monetary Policy Update, May 2020. 8
Sources: Statistics Norway and Norges Bank
Unemployment is expected to decline
Registered fully unemployed as share of the labour force.
1)Percent
1) Projections from Monetary Policy Report 1/20 and Monetary Policy Update, May 2020. 9
Sources: Norwegian Labour and Welfare Administration (NAV) and Norges Bank
0 1 2 3 4 5 6 7 8 9
2012 2014 2016 2018 2020 2022
Projections monetary policy meeting 6 May Projections 11 March
Prospects for low wage growth
Annual change.
1)Percent
1) Projections from Monetary Policy Report 1/20 and Monetary Policy Update, May 2020. 10
Sources: Statistics Norway and Norges Bank
-1 0 1 2 3 4 5
2012 2014 2016 2018 2020 2022
Projections monetary policy meeting 6 May Projections 11 March
Temporarily higher inflation
0 1 2 3 4
2012 2014 2016 2018 2020 2022
Projections monetary policy meeting 6 May Projections 11 March Inflation target
CPI-ATE.
1)Four-quarter change. Percent
1) Projections from Monetary Policy Report 1/20 and Monetary Policy Update, May 2020. 11
Sources: Statistics Norway and Norges Bank
