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Charts Monetary Policy Report 2/2007

Charts Monetary Policy Report 2/2007. 1 Monetary policy assessments and strategy. Chart 1.1 Interval of uncertainty for underlying inflation. Highest and lowest indicator. 1) 12-month change. Per cent. Monthly figures. Jan 02 – May 07. Highest indicator. Lowest indicator.

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Charts Monetary Policy Report 2/2007

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  1. Charts Monetary Policy Report 2/2007

  2. 1 Monetary policy assessments and strategy

  3. Chart 1.1 Interval of uncertainty for underlying inflation. Highest and lowest indicator. 1) 12-month change. Per cent. Monthly figures. Jan 02 – May 07 Highest indicator Lowest indicator 1) Highest and lowest indicator of CPI-ATE, weighted median and trimmed mean. See box on recent price developments. Sources: Statistics Norway and Norges Bank

  4. Chart 1.2 Consumer prices. 12-month change. Per cent. Monthly figures. Jan 02 – May 07 Energy products (left-hand scale) Other domestically produced goods and services1) 2), (right-hand scale) Imported consumer goods1) (right-hand scale) 1) Adjusted for tax changes and excluding energy products. 2) Adjusted for the estimated effect of reduced maximum day-care rates in 2006 Sources: Statistics Norway and Norges Bank

  5. Chart 1.3 CPI and CPI-ATE1). 12-month change. Per cent. Monthly figures. Jan 02 – May 07 CPI CPI-ATE 1) CPI-ATE: CPI adjusted for tax changes and excluding energy products. A further adjustment is made for the estimated effect of reduced maximum day-care rates in 2006. Sources: Statistics Norway and Norges Bank

  6. Chart 1.4 Terms of trade, house prices and equity prices. Indices, 1996 = 100. Annual figures. 1996 – 2006 Equity prices (OSEBX) House prices Terms of trade Sources: Norwegian Association of Real Estate Agents, Association of Real Estate Agency Firms, Finn.no, ECON, Oslo Stock Exchange (Reuters (EcoWin)), Statistics Norway and Norges Bank

  7. Chart 1.5 3-month real interest rate1), 10-year real interest rate2) and the normal real interest rate in Norway. Per cent. Quarterly figures. 96 Q1 – 07 Q1 10-year real interest rate Interval for normal real interest rate 3-month 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 this report form the basis for this estimate. 2) 10-year swap rate deflated by the inflation target. Source: Norges Bank

  8. Chart 1.6 Policy rates and forward rates at 9 March 2007 and 21 June 2007.1) Per cent. Daily and quarterly figures. 1 Jan 06 – 31 Dec 10 UK US Euro area Sweden 1) Broken lines show forward rates on 21 June 2007. Dotted lines show forward rates on 9 March 2007. Forward rates are based on interest rates in the money market and interest rate swaps. Sources: Reuters (EcoWin) and Norges Bank

  9. Chart 1.7 Exchange rates.1) The import-weighted exchange rate index (I-44), NOK/EUR and NOK/USD. Weekly figures. Week 1 2002 – Week 25 2007 NOK/EUR (right-hand scale) I-44 (left-hand scale) NOK/USD (right-hand scale) 1) A rising curve denotes a weaker krone exchange rate. Source: Norges Bank

  10. Chart 1.8 CPI. 10-year moving average1) and variation2). Per cent. Annual figures. 1980 – 20063) CPI Inflation target 1) The moving average is calculated 7 years back and 2 years ahead. 2) The band around the CPI is the variation in the CPI adjusted for tax changes and excluding energy products in the average period, measured by +/- one standard deviation. 3) Projections for 2007 and 2008 from this report form the basis for this estimate. Sources: Statistics Norway and Norges Bank

  11. Chart 1.9 Rise in prices for domestically produced goods and services1) and output gap level (lagged by 4 quarters). Quarterly figures. 93 Q1 – 07 Q1 Output gap (left-hand scale) Rise in prices for domestically produced goods and services (right-hand scale) 1) Adjusted for tax changes and excluding energy products Sources: Statistics Norway and Norges Bank

  12. Chart 1.10 Expected consumer price inflation 2 years ahead. Employer/employee organisations and experts1). Per cent. Quarterly figures. 02 Q2 – 07 Q2 Employee organisations (yellow line) Employer organisations (blue line) Experts (red line) 1) Employees in financial industry, macroanalysts and academics. Source: TNS Gallup

  13. 30% 50% 70% 90% Chart 1.11a Projected key policy rate in the baseline scenario with fan chart. Per cent. Quarterly figures. 05 Q1 - 10 Q4 Source: Norges Bank

  14. 30% 50% 70% 90% Chart 1.11b Projected output gap in the baseline scenario with fan chart. Per cent. Quarterly figures. 05 Q1 - 10 Q4 Source: Norges Bank

  15. 30% 50% 70% 90% Chart 1.11c Projected CPI in the baseline scenario with fan chart. 4-quarter rise. Per cent. Quarterly figures. 05 Q1 - 10 Q4 Sources: Statistics Norway and Norges Bank

  16. 30% 50% 70% 90% Chart 1.11d Projected CPI-ATE in the baseline scenario with fan chart. 4-quarter rise. Per cent. Quarterly figures. 05 Q1 - 10 Q4 Sources: Statistics Norway and Norges Bank

  17. Chart 1.12 Key policy rate in the baseline scenario in MPR 1/07 and MPR 2/07. Per cent. Quarterly figures. 05 Q1 – 10 Q4 MPR 2/07 MPR 1/07 Source: Norges Bank

  18. Chart 1.13 Forward interest rates for trading partners and projected interest rate differential in MPR 1/07 and MPR 2/07. Money market rates1). Quarterly figures. 05 Q1 – 10 Q4 Forward interest rates trading partners2) 21 June 9 March MPR 1/07 Interest rate differential against trading partners3) MPR 2/07 1) Money market rates are approximately 0.2 percentage point higher than the key policy rate. 2) Weighted average of trading partners' forward rates. 3) Interest rate differential in the baseline scenario. Source: Norges Bank

  19. Chart 1.14 Import-weighted exchange rate (I-44)1) in the baseline scenario in MPR 1/07 and MPR 2/072). Quarterly figures. 05 Q1 - 10 Q4 MPR 2/07 MPR 1/07 1) A rising curve denotes a weaker krone exchange rate. 2)The exchange rate path is based on uncovered interest rate parity. Source: Norges Bank

  20. Chart 1.15 Projected inflation and output gap in the baseline scenario. Per cent. Quarterly figures. 05 Q1 - 10 Q4 Output gap (left-hand scale) CPI (right-hand scale) CPI-ATE (right-hand scale) Sources: Statistics Norway and Norges Bank

  21. Chart 1.16 Debt burden and debt burden adjusted for general living expenses. Households with debt1). Per cent. Annual figures. 1987 – 20062) Debt burden (left-hand scale) Adjusted debt burden3) (right-hand scale) 1) Excluding self-employed and students. 2) Estimates for 2005 and 2006. 3) Disposable income is adjusted for general living expenses as calculated by the National Institute for Consumer Research (SIFO). Sources: Statistics Norway, SIFO and Norges Bank

  22. Chart 1.17 Projections of household interest burden1) and debt burden2). Per cent. Annual figures. 1987 – 2010 Interest burden (left-hand scale) Debt burden (right-hand scale) 1) Interest expenses after tax as a percentage of disposable income adjusted for estimated reinvested dividends less return on insurance claims and plus interest expenses. 2) Loan debt as a percentage of disposable income adjusted for estimated reinvested dividends less return on insurance claims. Sources: Statistics Norway and Norges Bank

  23. Chart 1.18 Comparison of rise in prices for domestically produced goods and services in two periods1). 4-quarter rise. Per cent. Quarterly figures. 96 Q1 – 98 Q4 and 06 Q1 – 08 Q4 96 Q1 – 98 Q4 06 Q1 – 08 Q4 1996 / 2006 1997 / 2007 1998 / 2008 1) Adjusted for tax changes and excluding energy products. A further adjustment is made for the estimated effect of reduced maximum day-care rates in 2006. Sources: Statistics Norway and Norges Bank

  24. 30% 50% 70% 90% Chart 1.19a Key policy rate in the baseline scenario and in the alternatives with higher and lower inflation. Per cent. Quarterly figures. 05 Q1 - 10 Q4 Higher inflation Lower inflation Source: Norges Bank

  25. 30% 50% 70% 90% Chart 1.19b CPI-ATE1) in the baseline scenario and in the alternatives with higher and lower inflation. 4-quarter rise. Per cent. Quarterly figures. 05 Q1 - 10 Q4 Higher inflation Lower inflation 1) CPI-ATE: CPI adjusted for tax changes and excluding energy products. A further adjustment is made for the estimated effect of reduced maximum day-care rates in 2006. Sources: Statistics Norway and Norges Bank

  26. 30% 50% 70% 90% Chart 1.19c Output gap in the baseline scenario and in the alternatives with higher and lower inflation. Per cent. Quarterly figures. 05 Q1 - 10 Q4 Lower inflation Higher inflation Source: Norges Bank

  27. Chart 1.20 Key policy rate in the baseline scenario and estimated forward rates1).Per cent. Quarterly figures. 06 Q1 – 10 Q4 Baseline scenario Forward rates 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. The grey, shaded interval shows the highest and lowest interest rates in the period 8 – 21 June 2007. Source: Norges Bank

  28. Chart 1.21 Key policy rate, Taylor rate, growth rule and rule with external interest rates.1) Per cent. Quarterly figures. 00 Q1 – 07 Q1 Taylor rate (blue line) Key policy rate (red line) Growth rule (yellow line) Rule with external interest rates (green line) 1) The CPI-ATE adjusted for the estimated effect of reduced maximum day-care rates in 2006 has been used as a measure of inflation. Other measures of underlying inflation that have been higher than the CPI-ATE would have resulted in a higher interest rate path. Source: Norges Bank

  29. Chart 1.22 Key policy rate and interest rate developments that follow from Norges Bank's average pattern for the setting of interest rates.1). Per cent. Quarterly figures. 00 Q1 – 07 Q4 Interest rate movements that follow from Norges Bank's average pattern with a 90% confidence interval (grey area) Key policy rate (red line) 1) The interest rate movements are explained by developments in inflation, mainland GDP growth, wage growth and 3-month interest rates among trading partners. See Inflation Report 3/04 for further discussion. Source: Norges Bank

  30. Chart 1 Interval for the key policy rate at the end of each strategy period and actual developments.1)Per cent. Daily figures. 2 Jan 04 – 21 Jun 07 1/07 3/06 Strategy period 2/06 1/06 3/03 3/05 2/05 1/04 1/05 3/04 2/04 Key policy rate 1) The executive board's decision on 27 June is not shown in the chart, see table p. 62 Source: Norges Bank

  31. 2 Economic developments

  32. Chart 2.1 Inflation. 12-month change in the CPI. Per cent. Monthly figures. Jan 02 – May 07 US Euro area UK Japan Sources: Reuters (EcoWin) and Norges Bank

  33. Chart 2.2 Consumer prices1), credit and money supply2) in the US, the euro area and Japan.3) Quarterly figures. 90 Q4 – 07 Q1 Money supply3) (left-hand scale) Credit (left-hand scale) Consumer prices (right-hand scale) 1) CPI: 12-month rise. Per cent. 2) Credit and money supply as a share of nominal GDP. Indices, 1995 = 100. Credit to private sector. Money supply: M3 for euro area and Japan, M2 for the US. 3) Weighted by GDP in 2000 and PPP exchange rates. Source: Bank for International Settlements

  34. Chart 2.3 Nominal and real interest rates on 10-year government bonds in the US and the euro area. Per cent. Daily figures. 2 Jan 06 – 21 Jun 07 US – nominal interest rate Euro area – nominal interest rate US – real interest rate Euro area – real interest rate Source: Reuters (EcoWin)

  35. Chart 2.4 Developments in international stock indices. 2 Jan 05 = 100. Daily figures. 2 Jan 05 – 21 Jun 07 Norway, OSEBX Emerging economies Japan Nikkei 225 Europe, STOXX US, S&P 500 Source: Reuters (EcoWin)

  36. Chart 2.5 Implied volatility in the foreign exchange market1) and the US equity market. Daily figures. 2 Jan 01 – 21 Jun 07 Implied volatility of US equities Implied volatility in the foreign exchange market 1) Index that describes risk in the global foreign exchange market as reflected in option prices for EUR/USD, USD/JPY and EUR/JPY. Sources: Reuters (EcoWin) and Norges Bank

  37. Chart 2.6 GDP. 4-quarter change. Per cent. Quarterly figures. 01 Q1 – 07 Q1 China India¹) US Japan UK Euro area 1) Measured by factor price. Sources: Reuters (EcoWin) and Norges Bank

  38. Chart 2.7 US – homes for sale at month-end compared with the month's sales. 3-month moving average. Monthly figures. Jan 90 – Apr 07 Existing homes New homes Sources: Reuters (EcoWin) and Norges Bank

  39. Chart 2.8 Mainland GDP. Annual growth in volume. Per cent. Annual figures. 1971 – 20071) 1) Projection for 2007. Sources: Statistics Norway and Norges Bank

  40. Chart 2.9 Terms of trade. Index, 1995 = 100. Annual figures. 1995 – 2006 Total Traditional goods and services Sources: Statistics Norway and Norges Bank

  41. Chart 2.10 Equity and return on equity before tax for some companies listed on the Oslo Stock Exchange.1) Per cent. Quarterly figures. 00 Q1 – 07 Q1 Equity ratio Return on equity 1) Excluding financial undertakings, Statoil and Hydro. Sources: The undertakings' quarterly reports (group) and Norges Bank

  42. Chart 2.11 Equity indices. 1 Jan 97 = 100. Daily figures. 1 Jan 97 – 21 Jun 07 Europe, Stoxx 600 Norway, OSEBX US, S&P 500 Source: Reuters (EcoWin)

  43. Actual ARIMA MPR 2/07 BVAR Monthly indicator VAR Regional network Chart 2.12 Mainland GDP. Growth on previous quarter. Seasonally adjusted. Per cent.Quarterly figures. 06 Q1 - 07 Q31) 1) Projections for 07 Q2 and 07 Q3. See the box "Short-term projections for mainland GDP growth" in Inflation Report 2/06 for a description of the different models. Sources: Statistics Norway and Norges Bank

  44. Chart 2.13 Unemployed. LFS unemployment, registered unemployed and persons on ordinary labour market programmes. Percentage of labour force. Seasonally adjusted. Monthly figures. Feb 83 – May 07 Registered unemployed and on labour market programmes LFS unemployment Registered unemployed Sources: Statistics Norway, Norwegian Labour and Welfare Organisation (NAV) and Norges Bank

  45. Chart 2.14 Number of vacancies per registered unemployed. 3-month centred moving average. Seasonally adjusted. Monthly figures. Feb 80 – Apr 07 Sources: Norwegian Labour and Welfare Organisation (NAV) and Norges Bank

  46. Chart 2.15 Estimates for the output gap. Per cent. Annual figures. 1983 – 20071) 1) Projection for 2007. Source: Norges Bank

  47. Chart 2.16 Change in employment on previous year (per cent) and LFS unemployment as a percentage of the labour force. Annual figures. 1980 – 20101) LFS unemployment rate (right-hand scale) Employment (left-hand scale) 1) Projections for 2007 - 2010. Sources: Statistics Norway and Norges Bank

  48. Chart 2.17 Labour force participation rate for persons aged 16 to 74. Annual figures. 1983 – 20071) 1) Projections for 2007. Sources: Statistics Norway and Norges Bank

  49. Chart 2.18 Registered employees from new EU countries. 1000s of persons in the period Jan – May 2005 2006 2007 2004 Source: Central Office - Foreign Tax Affairs

  50. Chart 2.19 Reasons for use of foreign labour. Per cent Shortage of Norwegian labour Qualifica-tions Other Season Cut costs Source: Norges Bank

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