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Executive Board meeting 15 August 2007

Executive Board meeting 15 August 2007. Growth forecasts Consensus Forecasts GDP. Percentage change on previous year. 2008. 2007. Source: Consensus Forecasts. House prices 1) and housing starts in the US Seasonally adjusted. 12-month rise 2) . January 2003 – June 2007. New dwellings.

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Executive Board meeting 15 August 2007

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  1. Executive Board meeting15 August 2007

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

  3. House prices1) and housing starts in the US Seasonally adjusted. 12-month rise2). January 2003 – June 2007 New dwellings Existing dwellings 1) Median price for dwellings. 2) 3-month moving average. Housing starts 3 Sources: Reuters (EcoWin) and Norges Bank

  4. Equities Indices,1 November 2006 = 100. 1 November 2006 – 14 August 2007 Euro area Norway Emerging economies US Japan 4 Source: Reuters (EcoWin)

  5. Implied volatility from equity options Per cent. 1 January 2006 – 13 August 2007 Norway US Europe 5 Sources: Reuters (Ecowin) and Oslo Stock Exchange

  6. Credit premium on BBB-rated corporate bonds 5-year maturity. Percentage points. 1 January 2004 –13 August 2007 US Europe 6 Source: Reuters (EcoWin)

  7. Credit spreads on bonds secured on sub-prime loans and ordinary mortgage loansBasis points. 19 January 2006 –13 August 2007 Subprime 2007 H1, BBB- Subprime 2006 H2, BBB- Subprime 2006 H1, BBB- MBS (mortgage bonds), BBB- 7 Source: Lehman Brothers

  8. Price of hedging credit risk. 5-year CDS prices Basis points. 1 July 2005 –13 August 2007 European banks (Itraxx index) DnB NOR 8 Sources: Bloomberg and Thomson Datastream

  9. Price of hedging credit risk. 5-year CDS prices Basis points. 3 October 2005 – 10 August 2007 Norske Skog (left-hand scale) Telenor Hydro Statoil 9 Source: Thomson Datastream

  10. Supply of liquidity from various central banks

  11. 13 August 2007 Market after MPR 2/07 (27 June) Key policy rates and forward ratesAs at previous monetary policy meeting and as at 13 August 2007 US Norway Euro area 11 Sources: Reuters (EcoWin), Bloomberg and Norges Bank

  12. 3-month interest rate differential and import-weighted exchange rate (I-44)1) January 2002 – December 2010 I-44 (left-hand scale) Average 1 – 13 August 2007 13 August 2007 Previous monetary policy meeting (27 June 2007) Weighted interest rate differential (right-hand scale) 1) A rising curve denotes an appreciation of the krone. 12 Sources: Bloomberg, Reuters (EcoWin) and Norges Bank

  13. Petroleum production in NorwayJanuary 2000 – May 2007 In million barrels per day Per cent Annual growth in total petroleum production (right-hand scale) Crude oil production (left-hand scale) Source: Norwegian Petroleum Directorate

  14. Oil price Brent Blend and futures prices USD per barrel. 3. January 2002 -13 August 2007 Previous monetary policy meeting (26 June) 13 August 2007 14 Sources: Telerate, IPE and Norges Bank

  15. Average prices for crude oil and natural gas 1997 Q1 – 2007 Q31) Gas price USD/1000 Sm3 Oil price USD per barrel Weighted average gas price Statoil/Hydro (left-hand scale) Brent Blend, USD/barrel (right-hand scale)1) Gas price UK (left-hand scale)1) Norwegian gas (left-hand scale) 1)Average daily figures to date in 2007 Q3. 15 Sources: Reuters (EcoWin), Statistics Norway, Statoil, Norsk Hydro and Norges Bank

  16. Various inflation indicators12-month change. Per cent. January 2002 – July 2007 CPI Weighted median CPI-ATE 20 per cent trimmed mean 16 Source: Statistics Norway

  17. CPI-ATE1)Total and by supplier sector. Projections MPR 2/07 12-month rise. Per cent. July 2003 – July 2007 Goods and services produced in Norway (0.7)2) CPI-ATE Imported consumer goods (0.3)2) 1) A further adjustment is made for the estimated effect of new maximum day-care rates in 2006. 2) Norges Bank's projections. 17 Sources: Statistics Norway and Norges Bank

  18. 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. 18 Sources: Statistics Norway and Norwegian Labour and Welfare Organisation (NAV)

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

  20. Capacity utilisation in manufacturing - Business tendency survey Per cent. 1983 Q1 – 2007 Q2 21 Source: Statistics Norway

  21. Enterprise sector credit1) and liquid assets2)12-month growth. Per cent. January 2000 – June 2007 (C3 to April) Money supply (M2) Total credit (C3) 1) Mainland non-financial enterprises (C3). 2) Non-financial enterprises' liquid assets (M2). 22 Source: Statistics Norway

  22. Retail sales index and index of commodity consumption Volume. Seasonally adjusted. January 2000 – June 2007 Index of commodity consumption Retail sales index Sources: Statistics Norway and Norges Bank

  23. House prices, household debt and the money supplyChange on same month/quarter previous year. Per cent January 2001 – July 2007 (C2 and M2 June) House prices Debt and money supply C2 Real estate business Statistics Norway M2 Sources: Norwegian Association of Real Estate Agents, Association of Real Estate Agency Firms, Finn.no, ECON, Statistics Norway and Norges Bank 24

  24. Household saving ratio and net lending as a share of disposable income1, 2)1980 – 2006 Saving Net lending 1) There is a break in the series between 1995 and 1996. 2) Adjusted for estimated reinvested share dividends for 2000 – 2005. Sources: Statistics Norway and Norges Bank

  25. Projections in Monetary Policy Report 2/07Per cent. 2005 Q1 – 2010 Q4 Key policy rate 30% Output gap 50% 70% 90% CPI CPI-ATE 26 Sources: Statistics Norway and Norges Bank

  26. Monetary policy strategy - evaluation The interest rate path presented in MPR 2/07 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 on economic developments. Given the inflation target, we will be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. The key policy rate should lie in the interval 4½ – 5½% in the period to the publication of the next Report on 31 October 2007, conditional on economic developments that are broadly in line with the projections. Monetary Policy Report 2/07 28

  27. Executive Board meeting15 August 2007 29

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