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Executive Board meeting 30 May 2007

Executive Board meeting 30 May 2007. Growth forecasts Consensus Forecasts GDP. Percentage change on previous year. 2007. 2008. Source: Consensus Forecasts. GDP - China and India Growth on same quarter previous year. China. India. Source: Reuters.

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Executive Board meeting 30 May 2007

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  1. Executive Board meeting30 May 2007

  2. Growth forecasts Consensus ForecastsGDP. Percentage change on previous year 2007 2008 Source: Consensus Forecasts

  3. GDP - China and IndiaGrowth on same quarter previous year China India Source: Reuters

  4. House prices1) and housing starts in the USSeasonally adjusted. 12-month change2)January 2003 – March 2007 (Housing starts to April) New dwellings Existing dwellings 1) Median price for dwellings 2) 3-month moving average Housing starts Sources: Reuters and Norges Bank

  5. Oil price Brent Blend and futures prices USD per barrel. 3 January 2002 – 28 May 2007 28 May 2007 Previous monetary policy meeting (24 April 2007) 5 Sources: Telerate, IPE and Norges Bank

  6. Equities Indices,1 January 2006 = 100. 1 January 2006 – 28 May 2007 Norway Euro area Emerging economies US Japan Sources: Reuters 6

  7. 25 May 2007 Previous monetary policy meeting (24 April 2007) Key policy rates and forward ratesAs at previous monetary policy meeting and as at 25 May 2007 UK Sweden Euro area US 7 Sources: Reuters, Bloomberg and Norges Bank

  8. 3-month interest rate differential and import-weighted exchange rate (I-44)1)January 2002 – December 2010 I-44 (left-hand scale) Average 1-25 May 2007 Previous monetary policy meeting (24 April 2007) 25 May 2007 Weighted interest rate differential (right-hand scale) 1) A rising curve denotes an appreciation of the krone. 8 Sources: Bloomberg and Norges Bank

  9. Norway's terms of trade2000 Q1 – 2007 Q1 Terms of trade traditional goods and services Overall terms of trade Sources: Statistics Norway and Norges Bank

  10. Inflation and interval for underlying inflation1)12-month change. Per cent. January 2002 – April 2007 CPI Highest indicator Lowest indicator 1) Highest and lowest indicator of the CPI-ATE, a weighted median and a trimmed mean of the sub-indices in the CPI. Sources: Statistics Norway and Norges Bank

  11. CPI-ATE Total and by supplier sector. 12-month change. Per centJune 2004 – April 2007 Goods and services produced in Norway (0.7)1) CPI-ATE Imported consumer goods (0.3)1) 1) Norges Bank's projections. Sources: Statistics Norway and Norges Bank

  12. Labour market Unemployment Per cent. Seasonally adjusted EmploymentIn 1000s QNA LFS unemployment Registered unemployed LFS1) 1) The changes to the LFS have resulted in a break in the time series between 2005 and 2006. 12 Sources: Statistics Norway and Norwegian Labour and Welfare Organisation (NAV)

  13. Average monthly real wage growth in Poland12-month growth Unemployment rateMonthly figures. January 2001 – April 2007 Slovakia Poland Lithuania Construction Latvia Estonia Total Norway 14 Source: Reuters

  14. Manufacturing output index Volume index. Seasonally adjusted 3-month moving average and trend Trend 3-month moving average Source: Statistics Norway

  15. Indicator of resource shortage - business tendency survey for manufacturingPer cent. 1983 Q1 – 2007 Q1 Source: Statistics Norway

  16. Annual growth in mainland enterprise sector credit, liquid assets and investment level In billions of current NOK. Monthly figures. January 1997 – March 2007 Credit (C3) Fixed investment1) Liquid assets (M2) 1) Gross fixed capital formation. Mainland Norway excl. dwellings and public sector. Total last four quarters 17 Source: Statistics Norway

  17. TNS Gallup's household trend indicatorTrend. 1992 Q3 – 2007 Q2 Source: TNS Gallup

  18. Retail sales index12-month growth. 3-month moving average. Per cent January 2000 – February 2007 Sources: Statistics Norway and Norges Bank

  19. Household net lending and net financial wealth to income ratioLast four quarters. 1997 Q1 - 2006 Q4 Net financial wealth to income ratio1) Net lending2) 1) Net assets as a share of disposable income. 2) In billions of NOK. Adjusted for estimated reinvested share dividends for 2000 – 2005. 20 Source: Norges Bank

  20. House prices and household debtChange on same month/quarter previous year. Per cent January 2001 – April 2007 (C2 March) House prices Household debt (C2) Real estate business Statistics Norway Sources: Norwegian Association of Real Estate Agents, Association of Real Estate Agency Firms, Finn.no, ECON, Statistics Norway and Norges Bank 21

  21. Housing starts and housing investmentTotal over 12 months/4 quarters January 2000 – March 2007 (Housing starts 2006 Q4) Housing investment, in billions of NOK1) (right-hand scale) Housing starts, in thousands (left-hand scale) 1) Constant 2004 prices. Sources: Statistics Norway and Norges Bank

  22. Commercial building startsArea (1000 m2) 3-month moving average. January 2002 – March 2007 Sources: Statistics Norway and Norges Bank

  23. Key policy rate in baseline scenario and estimated forward rates1)Per cent. At 25 May 2007 Baseline scenario MPR 1/07 Market 25 May 2007 Market cut-off MPR 1/07 (9 March 2007) Market previous monetary policy meeting (24 April 2007) 1) A credit risk premium and a technical difference of 0.20 percentage point have been deducted to make the forward rates comparable with the key policy rate. 24 Sources: Reuters and Norges Bank

  24. 3-month real interest rate1) and the normal real interest ratePer cent. 1996 Q1 - 2007 Q1 Real interest rate Interval for normal real interest rate 1) 3-month money market rate deflated by the 12-quarter moving average (centred) of inflation measured by the CPI. Projections for the CPI from MPR 1/07 form the basis for this estimate. 25 Source: Norges Bank

  25. Baseline scenario in Monetary Policy Report 1/07 Output gap Key policy rate 30% 50% 70% 90% CPI CPI-ATE 26 Sources: Statistics Norway and Norges Bank

  26. Monetary Policy Report 1/07 Monetary policy strategy • The interest rate path presented in Monetary Policy Report 1/07 reflects the Executive Board's trade-off between bringing inflation up to target and stabilising developments in output and employment. • In the light of this trade-off, the interest rate will be increased gradually so that we can assess the effects of interest rate changes and other new information about economic developments. • The key policy rate should lie in the interval 4 – 5% in the period to the publication of the next Report on 27 June 2007, conditional on economic developments that are broadly in line with the projections.

  27. Executive Board meeting30 May 2007

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