Norges Bank Central Bank of Norway Executive Board

Norges Bank (Central Bank of Norway) Executive Board meeting 26 April 2006 1

Norges Bank (Central Bank of Norway) Monetary Policy Strategy - Inflation Report 1/06 • The Executive Board's assessment is that the sight deposit rate should be in the interval 2¼ - 3¼ per cent in the period to the publication of the next Inflation Report on 29 June 2005, conditional on economic developments that are broadly in line with the projections. • The interest rate may gradually – in small, not too frequent steps – be brought back towards a more normal level. The objective of bringing inflation back to target and anchoring inflation expectations nevertheless implies that monetary policy remains expansionary. 2

Norges Bank (Central Bank of Norway) Growth projections for 2006 and 2007 Projections for GDP growth published by the IMF in September 2005 and April 2006. Per cent Source: IMF World Economic Outlook April 2006 3

Norges Bank (Central Bank of Norway) Developments on stock markets internationally 2 January 2002 = 100. 2 January 2002 – 24 April 2006 Source: Eco. Win 4

Norges Bank (Central Bank of Norway) Oil price Brent Blend and futures prices USD per barrel. 3 January 2002 – 24 April 2006 10 March IR 1/06 Sources: Norges Bank and Eco. Win 5

Norges Bank (Central Bank of Norway) Oil futures prices USD per barrel light crude. 3 January 2004 – 24 April 2006 Delivery in 1 month Delivery in 6 years Sources: Eco. Win/ NYMEX 6

Norges Bank (Central Bank of Norway) Metal prices Index. Week 1, 2001 = 100 USD Copper Nickel Steel Zinc Aluminium Source: Eco. Win 7

Norges Bank (Central Bank of Norway) Core inflation 1) 12 -month change. January 2002 – March 2006 US Euro area UK Sweden Japan 1) US: CPI excl. food and energy, Japan: CPI excl. fresh food Euro area, UK and Sweden: CPI excl. energy, food, alcohol and tobacco Source: Eco. WinEurostat 8

Norges Bank (Central Bank of Norway) Actual and expected key rates 1) UK Sweden Euro area 24 April 2006 US 1) Not 15 March 2006 adjusted for credit risk Sources: Reuters and Norges Bank 9

Norges Bank (Central Bank of Norway) Yields on 10 -year government bonds 2 January 2004 – 25 April 2006 Norway US Germany Japan Sources: Eco. Win and Norges Bank 10

Norges Bank (Central Bank of Norway) 3 -month interest rate differential and import-weighted exchange rate (I-44) 1) January 2002 – December 2009 I-44, (right-hand scale) Average 3 - 25 April Weighted 3 month interest rate differential (left-hand scale) 15 March 2006 24 April 2006 1) A rising curve denotes an appreciation of the krone. Sources: Bloomberg and Norges Bank 11

Norges Bank (Central Bank of Norway) Inflation 12 -month change. Per cent. January 2002 - March 2006 Weighted median CPI 1)A CPI-ATE 1) further adjustment is made for the estimated effect of reduced maximum day-care rates from January 2006. Sources: Statistics Norway and Norges Bank 12

Norges Bank (Central Bank of Norway) CPI-ATE 1) Total and by supplier sector 2). Actual inflation and projections from IR 1/06 12 -month change. Per cent. January 2004 - May 2006 Goods and services produced in Norway CPI-ATE Imported consumer goods 1)A further adjustment is made for the estimated effect of reduced maximum day-care rates from January 2006. Bank's calculations 2) Norges Sources: Statistics Norway and Norges Bank 13

Norges Bank (Central Bank of Norway) Change in prices for food and non-alcoholic beverages Excluding taxes. 12 -month change. Per cent. January 2004 – March 2006 Source: Statistics Norway 14

Norges Bank (Central Bank of Norway) Mainland GDP, excluding energy Percentage growth in volume on previous quarter. Seasonally adjusted Basis value. 2000 Q 1 - 2005 Q 4 Sources: Statistics Norway and Norges Bank 15

Norges Bank (Central Bank of Norway) Number of unemployed (LFS), registered unemployed and persons on labour market programmes In thousands. Seasonally adjusted. January 1996 – March 2006 Registered unemployed and on labour market programmes LFS unemployment Registered unemployed Sources: Statistics Norway and the Directorate of Labour 16

Norges Bank (Central Bank of Norway) Expected earnings in listed companies Index. 01. 2006 = 100 2006 2007 US US Japan Europe Norway Sources: Reuters and Eco. Win 17

Norges Bank (Central Bank of Norway) House prices (12 -month change) and housing starts (number of 1000 s in last 12 -months). January 2001 – March 2006 Housing starts House prices Sources: Statistics Norway, Norwegian Association of Real Estate Agents (NEF), Association of Real Estate Agency Firms 18 (EFF), ECON and Finn. no

Norges Bank (Central Bank of Norway) Credit growth Total debt mainland Norway (C 3). Domestic credit to households (C 2) 12 -month growth. Per cent Total debt of mainland enterprises Households Total debt Source: Norges Bank 19

Norges Bank (Central Bank of Norway) Sight deposit rate in baseline scenario and market expectations regarding the sight deposit rate 1) Per cent. 2006 Q 2 – 2009 Q 4 Baseline scenario Market 24 April 2006 Market expectations concerning the sight deposit rate 1) Derived from estimated forward rates. The sight deposit rate has been reduced by a credit risk premium and technical difference of 0. 20 percentage point. The grey shaded interval shows the highest and lowest interest rates in the market's sight deposit rate scenario in the period 6 – 24 April. 06 Source: Norges Bank 20

Norges Bank (Central Bank of Norway) Sight deposit rate in baseline scenario from Inflation Report 1/06 with fan chart Per cent. Quarterly figures. 2004 Q 1– 2009 Q 4 30 % 50 % 70 % 90 % Source: Norges Bank 21