Executive Board Meeting

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Executive Board Meeting

27 October 2010

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Growth projections for 2010. Change from previous year. Per cent

0 2 4 6 8 10 12

MPR 1/10

MPR 2/10

MPR 3/10

0 2 4 6 8 10 12

MPR 1/10

MPR 2/10

MPR 3/10

Growth projections for 2011. Change from previous year. Per cent

Source: Norges Bank

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Unemployment

Per cent of labour force. Seasonally adjusted.

January 2000 – September 2010 Unemployment

0 3 6 9 12 15 18 21

2000 2002 2004 2006 2008 2010 US

UK

Euro area Spain¹

Long-term unemployment

0 2 4 6 8 10 12 14

2000 2002 2004 2006 2008 2010 US

UK Spain¹

Source: Thomson Reuters 1) Not seasonally adjusted

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Global imbalances

Current account as percentage of world GDP. 1996 - 2009

-3 -2 -1 0 1 2 3 4

1996 1998 2000 2002 2004 2006 2008

US

Oil-exporting countries Germany and Japan

China and emerging market economies in Asia Rest of the world

Source: International Monetary Fund

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50 60 70 80 90 100 110 120 130 140 150

2007 2008 2009 2010 2011

JPY

GBP BRL

USD CNY EUR

KRW

Effective exchange rates

Index. 1 January 2007 = 100. 1 January 2007 – 25 October 2010

Sources: Bank of England, JPMorgan and Norges Bank

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CDS premiums on sovereign debt

5-year maturity. Percentage points. 1 January 2008 – 25 October 2010

0 3 6 9 12

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

Spain Portugal Ireland Italy Greece

Source: Bloomberg L.P.

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Key rates and estimated forward rates as at 23 June 2010 and 25 October 2010 ¹⁾

Per cent. 1 July 2007 – 31 December 2013

²⁾

0 1 2 3 4 5 6 7

jul-07 jul-08 jul-09 jul-10 jul-11 jul-12 jul-13

US

Euro area UK

Sources: Bloomberg L.P.

and Norges Bank 1) Broken lines show estimated forward rates as at 23 June 2010. Thin lines show forward

rates as at 25 October 2010. Forward rates are based on Overnight Indexed Swap (OIS) rates 2) Daily figures from 1 July 2007 and quarterly figures as at 25 October 2010

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Yields on 10-year government bonds

Per cent. 1 January 2000 – 25 October 2010

0 2 4 6 8

Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10

US Euro area UK

Source: Thomson Reuters

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Developments in equity markets

Index. 1 June 2007 = 100. 1 June 2007 – 25 October 2010

0 20 40 60 80 100 120 140

Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10

US

Euro area Japan Norway

Emerging market economies

Source: Thomson Reuters

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Three-month money market rate differential between Norway and trading partners and the import-weighted

exchange rate index (I-44) ¹⁾ Monthly- (historical) and quarterly figures (ahead). January 2002 – December 2013

-2 -1 0 1 2 3 4 5 85

88 91 94 97 100 103 106

2002 2004 2006 2008 2010 2012

I-44 (left-hand scale)

3-month rate differential (right-hand scale)

Sources: Thomson Reuters and Norges Bank 1) A rising curve denotes a stronger krone exchange rate

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Real exchange rate

Deviation from mean over the period 1970 – 2009. Per cent.

1970 – 2010

¹⁾

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

1970 1975 1980 1985 1990 1995 2000 2005 2010

Relative wages

Relative consumer prices

1) The squares show the average so far in 2010. A rising curve indicates weaker competitiveness

Sources: Statistics Norway, Technical Reporting

Committee on Income Settlements, Ministry of Finance and Norges Bank

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Norges Bank’s regional network

Output

Growth past 3 months and 6 months ahead.

Index

¹⁾

. October 2002 – September 2010

-3 -2 -1 0 1 2 3 4

Oct-02 Oct-05 Oct-08

Employment

Growth past 3 months and 3 months ahead

²⁾

. Per cent. October 2002 – September 2010

-3 -2 -1 0 1 2 3 4

Oct-02 Oct-05 Oct-08

1)The index ranges from -5 to +5, where -5 indicates a sharp fall and +5 indicates strong growth, see Economic Bulletin 2/2009 from Norges Bank

2) Mixed indicator until 2004. Split in to ’past 3 months’ and ’3 months ahead’ as from 2005 Source: Norges Bank’s regional network

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Spending on services and air traffic

4-quarter change. Per cent.

2001 Q1 – 2010 Q3

-3 -2 -1 0 1 2 3 4 5 6 7 8

-15 -10 -5 0 5 10 15 20

2001 2003 2005 2007 2009 Air traffic (left-hand scale) Spending on services (right-hand scale)

-3 -2 -1 0 1 2 3 4 5 6 7 8

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

2001 2003 2005 2007 2009 Hotel guest nights (left-hand scale)

Spending on services (right- hand scale)

Spending on services and hotel guest nights (non-business)

4-quarter change. Per cent.

2001 Q1 – 2010 Q3

¹⁾

Sources: Statistics Norway and AVINOR 1) Hotel guest nights for Q3 2010 is based on an average

of observations for July and August

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Credit to households ¹⁾ and house prices

12-month change. Per cent.

January 2002 – September 2010

²⁾

2002 2005 2008

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

House prices

Credit to households

Credit to enterprises ¹⁾

and commercial property prices ³⁾

12-month change. Per cent.

January 2002 – July 2010

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

2002 2005 2008

Commercial property prices Credit to enterprices

1) C2, households; C3, enterprises in mainland Norway 2) House prices to September. Credit growth to August 3) Semiannual figures to end of first half of 2010

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

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Changes in credit standards for households and non-financial corperations

2009 Q2 - 2010 Q4

Source: Norges Bank

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

09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 Actual credit standards

Expected credit standards

Non-financial corporations Households

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Key policy rate, money market rate ¹⁾ , weighted bank lending rates on new residential mortages ²⁾ and

average lending rates to corporations ³⁾

Per cent. 1 July 2007 - 25 October 2010

0 1 2 3 4 5 6 7 8 9

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

Money market rate Key policy rate

Bank lending rate (new residential mortgages) Average interest rate on loans to corporations

Sources: Norsk familieøkonomi AS, Statistics Norway and Norges Bank 1) 3-month NIBOR (effective)

2) Interest rate on new residential mortgages of NOK 1m within 60 per cent of purchase price with variable interest rate. Figures for the 20 largest banks, weighted

according to market share

3) Non-financial corporations. 2007 Q2 – 2010 Q2

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Projections for mainland GDP growth

Projections from SAM given at different points in time with fan chart from MPR 2/10. Four-quarter change. Per cent

-4 -2 0 2 4 6 8

Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11

SAM 23 June

SAM 22 September SAM 27 October

Sources: Statistics Norway and Norges Bank 1) System for Averaging Models. For more information about SAM and the

projections, see www.norges-bank.no

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CPI and CPIXE ¹⁾

Projections from MPR 2/10 (broken lines). 12-month change. Per cent.

January 2007 – September 2010

-1 0 1 2 3 4 5 6

2007 2008 2009 2010

CPI CPIXE

Sources: Statistics Norway and Norges Bank

1) CPI adjusted for tax changes and excluding temporary changes in energy prices. Real time data. See Staff Memo 2008/7 and 2009/3 from Norges Bank for a description of the CPIXE

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Consumer prices

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

-2,5 0 2,5 5 7,5

2002 2003 2004 2005 2006 2007 2008 2009 2010

CPI CPI-ATE

CPIXE CPI-FW²

CPIM¹ 20 per cent trimmed mean

1) CPI adjusted for frequency of price changes. See Economic commentaries 7/2009 from Norges Bank

2) Model-based indicator of underlying inflation. See Economic commentaries 6/2010 from Norges Bank and box in the MPR 3/10 from Norges Bank

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Projections for CPI-ATE ¹⁾

Projections from SAM given at different points in time with fan chart from MPR 2/10. Four-quarter change. Per cent

0 1 2 3 4

Mar-09 Sep-09 Mar-10 Sep-10 Mar-11

SAM 23 June

SAM 22 September SAM 27 October

90% 70% 50% 30%

1) CPI adjusted for tax changes and excluding energy products 2) System for Averaging Models

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Interval for the key policy rate at the end of each strategy period, actual developments ¹⁾ and

projected key policy rate

Per cent. January 2008 – December 2013

0 1 2 3 4 5 6 7 8 9

2008 2009 2010 2011 2012 2013

1/08 2/08

3/08

17 Dec 08

1/09 2/09

Key policy rate

Strategy period

3/09

1/10 2/10 3/07

3/10

Source: Norges Bank 1) The Executive Board's decision of 27 October 2010 is not

shown in the chart

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Executive Board Meeting