Inflation targeting. Governor Svein Gjedrem Gausdal 31 January Mainland GPD and consumer prices Percentage change on previous year

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1 Inflation targeting Governor Svein Gjedrem Gausdal January SG Gausdal.. Mainland GPD and consumer prices Percentage change on previous year Mainland GDP Consumer prices Source: Statistics Norway SG Gausdal..

2 Annual wage growth ) and unemployment rate ) Per cent Annual wage growth Unemployment ) Average for all groups. Including costs associated with additional vacation days ) Registered unemployed as a percentage of the labour force Sources: TRCIS, the Directorate of Labour and Norges Bank SG Gausdal.. Output gap Per cent of trend GDP Hodrick-Prescott method Production function method Sources: Statistics Norway and Norges Bank SG Gausdal..

3 Stock market prices in Norway and the US Monthly figures. December 99= Oslo Stock Exchange Benchmark S&P Oslo Stock Exchange IT Jan 9 Jan 97 Jan 98 Jan 99 Jan Jan Jan Jan Source: EcoWin SG Gausdal.. Implementation of monetary policy The interest rate is set so as to keep inflation at a low and stable level Higher interest rates will reduce inflation by curbing demand and strengthening the krone. An interest rate reduction has the opposite effect. The effects of interest rates on inflation may vary over time. The effects on the exchange rate may vary according to international conditions - interest rates in other countries - required rates of return and risk premiums in financial markets SG Gausdal..

4 Difference between Norwegian and German forward interest rates years ahead. Per cent //99 //99 /7/ // // // Source: Norges Bank SG Gausdal.. 7. Forward interest rates years ahead. US, Germany and Norway Per cent Norway US... Germany... // // /9/ // // /9/ // Source: Norges Bank SG Gausdal..

5 Consumer price inflation. -month rise. Per cent CPI CPI-ATE ) ) Norges Bank s estimates up to July. Thereafter figures published by Statistics Norway Sources: Statistics Norway and Norges Bank SG Gausdal.. Underlying inflation in the fourth quarter of Projections published at different times and actual inflation. Actual price inflation. SG Gausdal.... Nov Jan Sources: Statistics Norway and Norges Bank Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan..

6 Annual wage growth in Projections published at different points in time. Per cent 7 7 Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Source: Norges Bank SG Gausdal Labour costs ) in manufacturing: Norway and trading partners Percentage change in hourly costs ) Labour costs per hour Norway Trading partners Sources: Statistics Norway, TRCIS/IMF and Norges Bank SG Gausdal..

7 Wage gap ) and output gap Per cent Output gap Wage gap ) Up to : difference between rise in hourly labour costs in manufacturing in Norway and among trading partners. Thereafter growth in excess of. per cent Sources: Statistics Norway, TRCIS/IMF and Norges Bank SG Gausdal... Krone exchange rate ) and -month interest rate differential against trading partners. Per cent Interest rate differential, (left-hand scale) TWI (right-hand scale) Jan 99 Jul 99 Jan Jul Jan Jul Jan Jul Jan ) Trade-weighted effective exchange rate (TWI). A rising value denotes an appreciating rate Source: Norges Bank SG Gausdal..

8 Output gap for the euro area, the OECD countries and Norway. Per cent of trend GDP Norway ) OECD countries Euro area ) Mainland Norway Sources: OECD and Norges Bank SG Gausdal.. Mainland GDP in Percentage change. Projections published at different points in time Nov Mar Jul Nov Mar Jul Nov Source: Norges Bank SG Gausdal..

9 Fiscal policy The fiscal policy guideline: the central government budget deficit shall be equivalent over time to the expected real return on the Government Petroleum Fund. The fiscal guideline has been adhered to The fiscal guideline implies that petroleum revenues shall be phased in gradually The fiscal guideline is robust to fluctuations in government revenues SG Gausdal.. US - consumer confidence Monthly figures. Seasonally adjusted. 98= Sources: EcoWin/Conference Board and NBER SG Gausdal..

10 Industrial confidence in the euro area and the German IFO index Monthly figures. Seasonally adjusted Euro area (left-hand scale) IFO business climate (righthand scale) Sources: EcoWin, EU Commission and IFO SG Gausdal.. Contribution of exports and net exports ) to GDP growth Percentage points Exports Net exports ) Based on figures for total imports and exports for mainland economy. figures are projections Sources: Statistics Norway and Norges Bank SG Gausdal..

11 Regional network November Generally falling production in the export industry. Slow growth in industrial output for the domestic market For retail trade and services there is growth in supplies to households and no growth in supplies to the business sector Lower unemployment in manufacturing and higher demand for labour in retail trade SG Gausdal.. Change in number of unemployed on same month previous year Total number of unemployed and long-term unemployed Total Long-term - - mai jul sep nov jan mar mai jul sep nov jan Sources: Statistics Norway and the Directorate of Labour SG Gausdal..

12 Consumer confidence indicator Trend - - Unadjusted Sources: Norsk Gallup Institutt AS, Association of Norwegian Savings Banks SG Gausdal.. Credit growth by borrower sector and house prices. -month rise. Per cent Non-financial corporate sector Households House prices Sources: Norwegian Association of Real Estate Agents, EFF, FINN.no, ECON EF, ECON and Norges Bank SG Gausdal..

13 Electricity prices January 998 = 8 Spot prices incl. tax and grid rental Electricity prices index in the CPI* 8 *Electricity (including grid rental) accounts for.% of CPI Jan Jul Jan Jul Jan Jul Jan Sources: Statistics Norway, NordPool, Viken Energi and Norges Bank SG Gausdal..