Executive Board Meeting

(1)

Executive Board Meeting

18 September 2013

(2)

1. Banks should become more resilient during an upturn

2. The size of the buffer should be viewed in the light of other requirements applying to banks

3. Stress in the financial system should be alleviated

Criteria for an appropriate countercyclical

capital buffer

(3)

3 -4 -2 0 2 4

-4 -2 0 2 4

2008 2010 2012 2014 2016

Output gap

-1 0 1 2 3 4 5

2008 2010 2012 2014 2016

CPI-ATE

-1 0 1 2 3 4 5

2008 2010 2012 2014 2016

CPI

MPR 3/13 MPR 2/13

0 1 2 3 4 5 6 7

2008 2010 2012 2014 2016

Key policy rate

Baseline scenario in MPR 3/13

Percent. 2008 Q1 – 2016 Q4

30%

50%

70%

90%

Sources: Statistics Norway and Norges Bank

(4)

0 1 2 3 4 5 6 7 8

2008 2010 2012 2014 2016

Key policy rate

-4 -3 -2 -1 0 1 2 3 4

2008 2010 2012 2014 2016

Output gap

0 1 2 3 4 5

2008 2010 2012 2014 2016

CPI-ATE

Criterion 1 Criteria 1&2 Criteria 1,2&3

Criteria for an appropriate interest rate path

Percent. 2008 Q1 – 2016 Q4

(5)

Factors behind changes in the interest rate path since MPR 2/13

Accumulated contribution. Percentage points. 2013 Q4 – 2016 Q4

5 Source: Norges Bank

-1 0 1

2013Q4 2014Q2 2014Q4 2015Q2 2015Q4 2016Q2 2016Q4

Lending spreads Capacity utilisation Money market premium Exchange rate Interest rates abroad Prices

Change in the interest rate forecast

(6)

GDP projections

Annual growth. Percent

Source: Norges Bank

-1 0 1 2 3 4 5 6 7

25 trading partners

Euro area US Emerging

economies incl.

China

2013 2014

(7)

7

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

2005 2007 2009 2011 2013

Emerging economies Advanced economies

Sources: Thomson Reuters and Norges Bank

95 100 105

2010 2011 2012 2013

Euro area UK

Japan US

OECD China

Russia South Korea

Indonesia Mexico Brazil

Advanced economies

Emerging economies

OECD leading indicator

January 2010 – July 2013

Manufacturing output 25 TP

Export weights. 12-month growth, 3-month moving average. January 2005 – July 2013

(8)

Emerging economies

Sources: IMF, Thomson Reuters and Norges Bank

Exchange rates

¹⁾

Index. 1 Jun. 2012 = 100.

1 June 2012 – 16 September 2013 80

90

100

110

120

130 80

90

100

110

120

130

Jun-12 Dec-12 Jun-13

Philippines South Korea Malaysia Taiwan Indonesia Turkey

Brazil India

-15 -10 -5 0 5 10 15 20

2000 2004 2008 2012

Malaysia Taiwan Philippines South Korea Indonesia Brazil

India Turkey

Current account balances

As percentage of GDP. Annual figures. 2000 - 2012

1) In local currency units per US dollar

(9)

9

8 9 10 11

Jul-12 Jan-13 Jul-13

Manufacturing output

12-month change.

July 2012– August 2013

0 5 10 15 20 25 30 35 40

2005 2008 2011 2014

GDP

Credit growth, 4 quarters ahead

Growth in nominal GDP and credit growth

Four-quarter growth. 2005 Q1–2013 Q2

Sources: CEIC, Thomson Reuters and Norges Bank

China

(10)

Advanced economies

-2 -1 0 1 2 3

2010 2011 2012 2013

Euro area Germany

France Spain

Netherlands Italy

Sources: Thomson Reuters and Norges Bank

Quarterly GDP growth

2010 Q1 – 2013 Q2

90 92 94 96 98 100 102 104 106

2008 2010 2012

US UK

Euro area

GDP at constant prices

Index. 2008 Q1 = 100.

2008 Q1 - 2013 Q2

(11)

0 1 2 3 4

2010 2011 2012 2013 2014 2015 2016 2017

US

Euro area²⁾

UK Sweden

MPR 2/13 (13 June) 16 September 2013

Expected key rates

Percent. 1 January 2010 – 31 December 2017

¹⁾

Sources: Thomson Reuters, Bloomberg and Norges Bank 1) Expected key rates are derived from Overnight Index Swap (OIS) rates. Daily figures

from 1 January 2010 and quarterly figures from 2013 Q3 2) EONIA in the euro area

11

(12)

Financial markets

0 40 80 120 160

Jan-11 Jan-12 Jan-13

S&P 500 (US) DAX (Germany) IBEX (Spain) Europe financials Emerging Markets Italy

Source: Bloomberg

0 2 4 6 8

US Germany UK Spain Italy

-150 -100 -50 0 50 100 150

US UK Euro area

Financial conditions indices

Equity markets

Yields on 10-year government bonds

0 0.2 0.4 0.6 0.8 1 1.2

Jan-13 Mar-13 May-13 Jul-13 Sep-13

US UK

Euro area

Expected key rates two years ahead

(13)

Prices for coal, crude oil and natural gas

USD per MMBtu.¹⁾

January 2003 – July 2016

Commodity prices

Index. 2 January 2003 = 100

2 January 2003 – 16 September 2013

Sources: IMF, Ministry of Finance, Thomson Reuters, Statistics Norway, CME Group and Norges Bank

0 100 200 300 400 500 600 700

2003 2006 2009 2012

Aluminium Copper

Wheat Maize

Soya beans

 13

0 5 10 15 20 25

2003 2006 2009 2012 2015

Gas UK Gas Russia Gas US Coal US Oil

Gas Norway Futures prices

1) Million British thermal unit

(14)

International exchange rates

Effective exchange rates, G10 currencies. Percent. Change from 19 June 2013. At 16 September 2013

-3.7 %

-2.7 %

-1.1 % -1.1 %

-0.9 % -0.3 %

0.0 %

1.5 % 2.3 %

3.2 %

-6% -4% -2% 0% 2% 4%

Japanese yen Norwegian krone Swedish krona Australian dollar Canadian dollar Swiss franc Euro US dollar Pound sterling New Zealand dollar

Source: Bloomberg

(15)

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

1 January 2008 – 16 September 2013

80

85

90

95

100

105

110 80

85

90

95

100

105

110

2008 2009 2010 2011 2012 2013

I-44

Projections MPR 3/13 Projections MPR 2/13

15

1) A positive slope denotes a stronger krone exchange rate Source: Norges Bank

(16)

Interest rate projections

Percent. 2010 Q1 – 2016 Q4

0 1 2 3 4 5 6

2010 2011 2012 2013 2014 2015 2016

Lending rate, households¹⁾

Key policy rate

3-month money market rate

Sources: Statistics Norway and Norges Bank 1) Average interest rate on all loans to households from

banks and mortgage companies

(17)

17 Sources: DNB Markets, Statistics Norway and Norges Bank

Mortgage lending rates and funding costs

Percent. 1 January 2010 – 16 September 2013

0 1 2 3 4 5 6

2010 2011 2012 2013

Risk premium on 5-year covered bonds

Difference between money market rate and key policy rate Key policy rate

Residential mortgage rate (credit lines) Estimated cost of mortgage financing

(18)

Lower growth in the Norwegian economy

Semi-annual growth

¹⁾

0 1 2 3 4 5

Private consumption Corporate investment Exports, mainland Norway

GDP, mainland Norway

Employment

2012 2013

Source: Statistics Norway 1) Growth compared with same half of previous year.

(19)

Norges Bank’s regional network – output growth

Aggregated. Past 3 months and expected growth next 6 months. Percent

-6 -4 -2 0 2 4 6 8

2003 2005 2007 2009 2011 2013

Expected output next 6 mths. - in May Expected output next 6 mths. - in August

Source: Norges Bank 19

(20)

Capacity constraints, regional network ¹⁾

Percent. 2005 Q1 – 2013 Q3

1) Share of contacts that will have some or considerable problems accommodating an increase in demand

Unemployment rate

Seasonally adjusted

February 2006 – August 2013

0 0.5 1 1.5 2 2.5 3 3.5 4

2006 2008 2010 2012

Sources: NAV and Norges Bank

10 20 30 40 50 60 70

2005 2007 2009 2011 2013

(21)

Household credit growth and house prices

Four-quarter change. Percent. 2004 Q1 – 2016 Q4

¹⁾

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

2004 2006 2008 2010 2012 2014 2016

House prices Credit growth

21 1) House prices to 2013 Q2. Projected to 2016 Q4. Sources: Statistics Norway, the real estate sector

(NEF, EFF, FINN.no and Eiendomsverdi) and Norges Bank

(22)

Credit growth, households and non-financial enterprises

Four-quarter change. Percent. 2000 Q1 – 2013 Q2

-10 0 10 20 30

2000 2002 2004 2006 2008 2010 2012

Household credit growth (C2)

Total credit growth, non-financial enterprises (C3)

(23)

-20 -15 -10 -5 0 5 10 15 20 25 30

2010 2011 2012 2013

Domestic note and bond debt

Foreign debt (mainland enterprises) Domestic bank debt

23

Credit growth, non-financial enterprises, by source

12-month change. Percent. January 2010 – July 2013

(24)

Real commercial property prices Wholesale funding/Total assets

Credit/GDP House prices/Income

Key indicators of financial imbalances

50 100 150 200

1975 1983 1991 1999 2007

50 100 150 200

1975 1983 1991 1999 2007 0

20 40 60

0 20 40 60

1975 1983 1991 1999 2007

50 100 150 200

1975 1983 1991 1999 2007

Indicator

Trend using augmented HP filter

Average

Sources: Statistics Norway, IMF and Norges Bank

(25)

Key indicators. Deviation from trend

25

Average for* past 10 years/**recursive throughout period Augmented HP filter

One-sided HP filter

Wholesale funding/Total assets*

Credit/GDP* House prices/Income**

Real commercial property prices**

Sources: Statistics Norway, IMF and Norges Bank

(26)

CPI and CPI-ATE

12-month change. Percent. January 2009 – August 2013

¹⁾

0 0.5 1 1.5 2 2.5 3 3.5 4

2009 2010 2011 2012 2013

CPI CPI-ATE

Projections MPR 2/13

Sources: Statistics Norway and Norges Bank 1) Projections to September 2013

(27)

CPI-ATE. Total and by supplier sector

12-month change. Percent. January 2009 – August 2013

¹⁾

-2 -1 0 1 2 3 4

2009 2010 2011 2012 2013

Domestically produced goods and services Imported consumer goods

CPI-ATE

27 Sources: Statistics Norway and Norges Bank

Projections MPR 2/13

1) Projections to September 2013

(28)

CPI-ATE

Contribution from product groups to change in twelve-month CPI-JAE inflation. Percentage points. January 2012 – August 2013

-0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1

Furniture, white goods, etc. Other groups Recreation and culture Transport

Housing etc. Clothing and footwear

Food and non-alcoholic beverages CPI-ATE

(29)

0 1 2 3 4 5

2008 2009 2010 2011 2012 2013

29

House rents in the CPI-ATE

12-month change. Percent. January 2008 – August 2013

Source: Statistics Norway

(30)

0 1 2 3 4 5

-3 -2 -1 0 1 2 3 4

2000 2002 2004 2006 2008 2010 2012

Output gap (left-hand scale)

Domestically produced goods and services (right-hand scale)

Domestically produced goods and services excluding house rents in the CPI-ATE and output gap. Percent. 2000 Q1 − 2013 Q3

¹⁾

Sources: Statistics Norway and Norges Bank 1) Projections for 2013 Q3

(31)

Indicators of underlying inflation

12-month change. Percent.

January 2009 – August 2013

CPI-ATE

Actual figures and projections from SAM. Four-quarter change. Percent.

2011 Q1 – 2013 Q4

0 1 2 3

Mar-11 Mar-12 Mar-13

SAM MPR 2/13 SAM MPR 3/13 CPI-ATE

0 0.5 1 1.5 2 2.5 3 3.5 4

2009 2011 2013

20 % trimmed mean CPIXE

CPIM CPI

31 Sources: Statistics Norway and Norges Bank

(32)

Executive Board Meeting