charts for inflation report 1/2004. summary chart 1 projections for cpi-ate 1) and the output gap...

Charts for Inflation report 1/2004

Summary

Chart 1 Projections for CPI-ATE1) and the output gap2). Per cent

-2

-1

0

1

2

3

2002 2003 2004 2005 2006-2

-1

0

1

2

3

1) CPI-ATE: CPI adjusted for tax changes and excl. energy products2)The output gap is a measure of the difference between actual and trend output. See box in IR 1/03

Sources: Statistics Norway and Norges Bank

CPI-ATE

Output gap

Chart 2 CPI-ATE. Total and by supplier sector. 12-month rise. Per cent. Jan 2001 - Dec 2006

-6

-4

-2

0

2

4

6

2001 2002 2003 2004 2005 2006 2007-6

-4

-2

0

2

4

6


Goods and services produced in Norway

CPI-ATE

Imported consumer goods

Chapter 1

1.1 The economic situation

-4

-2

0

2

4

1980 1984 1988 1992 1996 2000-4

-2

0

2

4

1)GDP figures for 2003 are based on projections.


Chart 1.1 The output gap. Percentage deviation from trend mainland GDP. Annual figures. 1980-20031)

Chart 1.2 Real interest rate after tax.1) Quarterly figures. 1985 Q1 - 2004 Q12).

-3

0

3

6

9

1985 1988 1991 1994 1997 2000 2003-3

0

3

6

9

1) 3-month money market rates deflated by the CPI excluding energy products up to 1995, Norges Bank`s estimates for the CPI adjusted for tax changes and excluding energy products from June 1995 to July 2000, then the CPI-ATE. The same deflator is used for 5-year government bond yields, but from 2001 Q2 the inflation target of 2.5 per cent is used

2) The figure for 2004 Q1 is preliminary


3-month rate

5-year rate

2.22

2.24

2.26

2.28

2.30

1998 1999 2000 2001 2002 2003 20042.22

2.24

2.26

2.28

2.30

Source: Statistics Norway

Chart 1.3 Employed persons according to LFS. In millions. Monthly figures. Jan 1998 – Dec 2003. Seasonally adjusted.

-15

-10

-5

0

5

10

15

20

1970 1980 1990 2000-15

-10

-5

0

5

10

15

20

1) Hourly labour costs in manufacturing 2) Projections for wage growth in 2004. The projection for relative labour costs in common currency in 2004 is based on the assumption for the krone exchange rate in this report (TWI).

Sources: TRCIS, Ministry of Finance and Norges Bank

Chart 1.4 Relative labour costs¹): Norway and trading partners. Deviation from average 1970 -2003. Per cent. Annual figures. 1970 -20042)

Local currency

Common currency

2004

1.2 Consumer price inflation

Chart 1.5 CPI-ATE. Total1) and by supplier sector2). 12-month rise. Per cent. Jan 1999 - Jan 2004

-6

-4

-2

0

2

4

6

1999 2000 2001 2002 2003 2004-6

-4

-2

0

2

4

6

1) Norges Bank's estimates up to and including July 2000, thereafter figures published by Statistics Norway2) Norges Bank's estimates



CPI-ATE


Chart 1.6 Prices for some imported consumer goods.1) 12-month rise. Per cent. Jan 2001 - Jan 2004

-15

-10

-5

0

5

2001 2002 2003 2004-15

-10

-5

0

5

1) CPI adjusted for tax changes and excluding energy products. Percentage share of CPI-ATE in brackets


Cars (9)

Clothing and footwear (7)

Audiovisual equipment (3)

-1

0

1

2

3

4

5

6

1999 2000 2001 2002 2003 2004-1

0

1

2

3

4

5

6

1) CPI adjusted for tax changes and excluding energy products. Norges Bank's estimates


Chart 1.7 CPI-ATE. Domestically produced goods1). 12-month rise. Per cent. Jan 1999 – Jan 2004

Goods produced in Norway which are influenced to only a limited extent by

global market prices

Goods produced in Norway which are influenced by global market prices

Chart 1.8 Consumer prices. Total and adjusted for tax changes and excluding energy products. 12-month rise. Per cent. Jan 1999 - Jan 2004.

-3-2-10123456

1999 2000 2001 2002 2003 2004-3-2-10123456

1) Norges Bank's estimates up to and including July 2000, thereafter figures published by Statistics Norway


CPI

CPI-ATE1)

Chart 1.9 Electricity prices. Index. 1 Jan 1998=100. Daily figures. 1 Jan 2001 – 4 Mar 2004.

50

100

150

200

250

300

350

2001 2002 2003 200450

100

150

200

250

300

350

Sources: Statistics Norway, Nordpool, the Norwegian Water Resources and Energy Directorate and Norges Bank

Electricity in the CPI

Spot price including taxes and grid rental

1.3 Financial markets

Chart 1.10. Interest rate expectations. Actual developments and expected key rate1) at 4 March 2004. Daily figures

0

2

4

6

2003 2004 20050

2

4

6

1) Based on interest rates on FRA and futures contracts adjusted for the estimated difference between 3-month money market rates and the key rate.

Sources: Bloomberg, Reuters and Norges Bank

UK

Euro area

US

Norway

Source: Bloomberg

Chart 1.11 Yield on government bonds with 10 year residual maturity. Daily figures. 1 Jan 2003 - 4 Mar 2004.

3

4

5

6

jan. 03 apr. 03 jul. 03 okt. 03 jan. 043

4

5

6

US

Germany

Norway

Chart 1.12 International equity indices. 1 Jan 2003 = 100 Daily figures. 1 Jan 2003 – 4 Mar 2004.

80

100

120

140

160

180

Jan-03 Apr-03 Jul-03 Oct-03 Jan-0480

100

120

140

160

180

Source: Bloomberg

Norway OBX

US S&P 500

Germany DAX

Japan NIKKEI

Chart 1.13. Change in 3-month money market rates and effective exchange rates1). 23 Oct 2003 – 4 Mar 2004.

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

-150 -100 -50 0 50 100

1) A positive figure denotes a stronger exchange rate

Sources: Bank of England and Bloomberg

nok

usd

cadchfsek

eur

jpy

gbp

nzd

aud

Interest rate change. Basis points

Exch

ange

rate

cha

nge.

Per

cen

t

Chart 1.14. Individual exchange rate movements.1) Effective rates. Index. 1 Jan 2002=100. Daily figures. Jan 2002 – 4 Mar 2004.

70

80

90

100

110

120

130

140

Jan-02 Jul-02 Jan-03 Jul-03 Jan-0470

80

90

100

110

120

130

140

1) A rising curve denotes a stronger exchange rate

Source: Bank of England

NZD

EUR

USD

AUD

NOK

GBP

Chart 1.15. Exchange rate for NOK against EUR, USD and SEK.1) Daily figures. 1 Jan 2002 – 4 Mar 2004.

6.00

6.50

7.00

7.50

8.00

8.50

9.00

9.50


80

85

90

95

100

105

110

1) A rising curve denotes a weaker krone exchange rate

Source: Bloomberg

NOK/USD (left-hand

scale)

NOK per 100 SEK (right-hand scale)

NOK/EUR (left-hand scale)

1.4 Monetary Policy

Chart 1.16 Projections for CPI-ATE and the output gap1) in IR 3/03. Per cent

1) The output gap is a measure of the difference between actual and trend output. See box in IR 1/03


CPI-ATE

Output gap

-2

-1

0

1

2

3

2002 2003 2004 2005 2006-2

-1

0

1

2

3

Chart 1.17 CPI. Moving 10-year average (7 years back, current year and 2 years ahead). Per cent.

0

2

4

6

8

10

12

14

1979 1984 1989 1994 1999 20040

2

4

6

8

10

12

14

CPI1)

Inflation target

1) The band around the CPI is the variation in the period, measured by +/- one standard deviation


Source: Norges Bank

Chart 1.18 Strategy intervals for the sight deposit rate and actual developments. Nov. 2002 - Mar 2004.

Interval in Strategy Document 1/03Sight deposit

rate

Interval in Strategy Document 3/02



0

1

2

3

4

5

6

7

8

nov. 02 mar. 03 jul. 03 nov. 03 mar. 040

1

2

3

4

5

6

7

8

Chart 1.19 Interest rate expectations in the US Actual developments and expected key rate1). Daily figures

0

2

4

6

1999 2000 2001 2002 2003 2004 20050

2

4

6

Key rate

23 Oct 03

16 Dec 03

19 Jan 04

1) Based on Fed Funds futures and Eurodollar futures adjusted for the estimated spread between the 3-month Libor and Fed Funds rates


Chart 1.20 Interest rate expectations in the euro area. Actual developments and expected key rate1). Daily figures

0

2

4

6

1999 2000 2001 2002 2003 2004 20050

2

4

6

Key rate

23 Oct 03

16 Dec 03

20 Jan 04

1) Based on Euribor futures adjusted for the estimated spread between the 3-month Euribor and Refi rates


1) A rising curve denotes a stronger krone exchange rate

Source: Norges Bank

Chart 1.21 Import-weighted krone exchange rate1), sight deposit rate and 3-month interest rate differential against trading partners. Daily figures. 1 Jan 2002 – 4 Mar 2004

85

90

95

100

105

1102002 2003 2004

-2

0

2

4

6

8

10

I-44 (left-hand scale)

Sight deposit rate (right-hand scale)

Interest rate differential 3-month (right-hand

scale)

Chapter 2

Chart 2.1 GDP growth in the US, Japan, the euro area and among Norway's trading partners combined. Quarterly growth. Per cent. 01 Q1 - 04 Q3. Seasonally adjusted

-2

-1

0

1

2

-2

-1

0

1

2

2001 2002 2003

Sources: EcoWin/US Department of Commerce, ESRI (JP) EURO-OP/Eurostat and Norges Bank

US Euro area

JapanTrading partners

Chart 2.2 Employment. 12-month growth. Per cent. Jan 1997 - Jan 2004.

-3

-2

-1

0

1

2

3

4

1997 1999 2001 2003-3

-2

-1

0

1

2

3

4

Sources: EcoWin, Bureau of Labor Statistics (US), Federal Statistical Office (DE), Office of National Statistics (UK) and SCB (SE)

SwedenUS

UK

Germany

Chart 2.3 Structural budget balance. Per cent of GDP. Annual figures. 1995 - 20051).

-8

-6

-4

-2

0

2

1995 1997 1999 2001 2003 2005-8

-6

-4

-2

0

2

1) Projections for period 2003-2005

Source: OECD

Euro area

US

Japan

Chart 2.4 Annual wage growth1). Per cent. 1995 – 20052).

-2

0

2

4

6

1995 1997 1999 2001 2003 2005-2

0

2

4

6

1) Wage growth excluding public sector2) Projections for period 2003-2005

Source: OECD

Euro area

US

Japan

Chart 2.5 12-month rise in CPI. Per cent. Jan 2002 - Feb 2004

0

2

4

6

jan. 02 jul. 02 jan. 03 jul. 03 jan. 040

2

4

6

Sources: EcoWin, EUR-OP/Eurostat, Federal Statistical Office (DE), Central Statistics Office (IRL) and Central Bureau of Statistics (NL)

Ireland

Germany

Portugal

Netherlands

Sources: London Metal Exchange and EcoWin

Chart 2.6 Prices for aluminium, nickel and copper in USD. Index. 2001=100. Daily prices. 1 Jan 2001 – 4 Mar 2004

0

100

200

300

2001 2002 2003 20040

100

200

300

Copper

Nickel

Aluminium

Chart 2.7 GDP in China, Japan and Malaysia. Change on same quarter previous year. Per cent. 2001 Q1 - 2004 Q3

-4

-2

0

2

4

6

8

10

2001 2002 2003-4

-2

0

2

4

6

8

10

China

Japan

Sources: EcoWin, Statistics Japan, National Bureau of Statistics (CH) og Central Bank of Malaysia

Malaysia

Sources: EcoWin and Norges Bank

Chart 2.8 Oil price measured in USD and EUR per barrel. 14-day moving average. Daily prices. 18 Jan 2002 – 4 Mar 2004

15

20

25

30

35


20

25

30

35

Dollar per barrel

Euro per barrel

1) Brent Blend

Sources: International Petroleum Exchange and Norges Bank

Chart 2.9 Oil price1) in USD per barrel. Daily figures. 1 Jan 2001 – 4 Mar 2004. Futures prices from 4 Mar 2004.

15

20

25

30

35

2001 2002 2003 2004 2005 200615

20

25

30

35

Oil price

Futures prices 4 Mar 04

Chart 2.10 Consumer price inflation in the US, the euro area, Japan and among Norway's trading partners. Annual rise. 1995 - 20061)

-2

0

2

4

1995 1997 1999 2001 2003 2005-2

0

2

4

1) Projections for period 2004-2006

Sources: OECD, EU Commission and Norges Bank

Trading partners

Euro areaUS

Japan

Chapter 3

0

2

4

6

8

10

2001 2002 2003 2004 2005 20060

2

4

6

8

10

Chart 3.1 Assumption for the money market rate. Forward rate1) 2). Per cent

1) 3-month money market rates up to February 2004. 3-month forward rates are estimated using four money market rates and four government bond yields with different maturities as observed on 4 March.2) The money market rate is normally about ¼ percentage point higher than the sight deposit rate Source: Norges Bank

Forward rate4 March

3-month money market rate

Chart 3.2 Assumption for the krone exchange rate (I-44). Forward rates. Index1)

80

90

100

110

2001 2002 2003 2004 2005 200680

90

100

110


Source: Norges Bank

Forward rate 4 March

Import-weighted exchange rate, I-44

Chart 3.3 Sight deposit rate, 5-year swap rate and implied one-year swap rate 4 years ahead1). Weekly figures. 7 Jan 2002 - 4 Mar 2004.

0

1

2

3

4

5

6

7

8

jan. 02 jul. 02 jan. 03 jul. 03 jan. 040

1

2

3

4

5

6

7

8

1) Implied 1-year rate 4 years ahead is estimated using 4- and 5-year swap rates. Since 2002, the 5-year swap rate has been ½ percentage point higher than government bond yields on average.Sources: Norges Bank and EcoWin

Sight deposit rate

5-year rate

Implied 1-year rate 4 years ahead

Chart 3.4 Real growth in household disposable income and consumption. Annual figures. Per cent. 1990 - 2006.

0

2

4

6

8

10

1990 1993 1996 1999 2002 20050

2

4

6

8

10


Real income growth

Real growth in consumption

Chart 3.5 Consumer confidence indicator.1)

1999 Q1 - 2004 Q1. Unadjusted figures.

-30

-15

0

15

30

45

1999 2000 2001 2002 2003 2004-30

-15

0

15

30

45

Total

Personal financial situation

Country's economic situation

1) Provides an indication of the share with a positive assessment of the current situation and outlook for the future less the share with a negative assessment.

Source: TNS Gallup

Chart 3.6 Vacant office premises in Oslo, Asker and Bærum. Share of total real estate stock. 1991-20041)

0

2

4

6

8

10

12

1991 1994 1997 2000 20030

2

4

6

8

10

12

1) As at February

Source: Eiendomsspar AS

-12

-8

-4

0

4

8

12

16

20

1972 1976 1980 1984 1988 1992 1996 2000-6

-4

-2

0

2

4

6

8

10

Chart 3.7 Productivity growth and real growth in value added in commercial services. 2-year moving average. Annual figures. Per cent. 1972-2003.


Productivity (right-h. scale)Output (left-hand scale)

-8,7

Chart 3.8 Gross investment as a share of value added. Annual figures. 1985 -2006.

0.00

0.05

0.10

0.15

0.20

0.25

1985 1990 1995 2000 20050.00

0.05

0.10

0.15

0.20

0.25


Services and distributive trades

Average last 10 yearsManufacturing

and construction

-15

-10

-5

0

5

10

15

20

1970 1980 1990 2000-15

-10

-5

0

5

10

15

20

1) Hourly labour costs in manufacturing2) Projections for wage growth in 2004. The projection for relative labour costs in common currency in 2004 is based on the assumption for the krone exchange rate in this report (TWI).

Sources: TRCIS, Ministry of Finance and Norges Bank

Chart 3.9 Relative labour costs¹): Norway and trading partners. Deviation from average 1970 -2003. Per cent. Annual figures. 1970 -20042)

Local currency

Common currency

2004

Chart 3.10 Growth in local government income and activity and nominal growth in mainland GDP. Annual figures. Per cent. 1990-2003.

0

2

4

6

8

10

12

14

1990 1992 1994 1996 1998 2000 20020

2

4

6

8

10

12

14

Sources: The Technical Reporting Committee on Local Government Finance and Statistics Norway

Income growthActivity growthGrowth in mainland GDP

Chart 3.11 Local government surplus before loan transactions, net debt and net operating profit/ loss. Percentage of operating income. 1990-2003.

0

10

20

30

40

50

1990 1992 1994 1996 1998 2000 2002-8

-4

0

4

8

12Surplus1) (right-hand scale)Net debt2) (left-hand scale)Net operating profit/loss (right-hand scale)

1) Surplus before loan transactions2) Excluding claims on local government enterprises

Sources: The Technical Reporting Committee on Local Government Finance

Chart 3.12 Employment and labour force. In millions. Monthly figures. Jan 1999 - Dec 2003. Seasonally adjusted.

2.20

2.25

2.30

2.35

2.40

1999 2000 2001 2002 2003 20042.20

2.25

2.30

2.35

2.40

Source: Statistics Norway

Employment

Labour force

Chart 3.13 Number of new vacancies advertised, per business day. Monthly figures. Jan 2000 - Feb 2004. Seasonally adjusted.

0

300

600

900

1200

2000 2001 2002 2003 20040

300

600

900

1200

Source: Directorate of Labour

Chart 3.14 Change in employment on previous year. Per cent. Unemployment1) as a percentage of the labour force. Annual figures. 1980-2006.

0

2

4

6

1980 1985 1990 1995 2000 2005-4

-2

0

2

4

1) LFS unemployment


LFS unemployment(left-hand scale)

Numbers employed(right-hand scale)

Chapter 4

0

2

4

6

8

10

2001 2002 2003 2004 2005 20060

2

4

6

8

10

Chart 4.1 Assumption for the money market rate. Forward rate1) 2). Per cent.

1) 3-month money market rates up to and including February 2004. 3-month forward rates are estimated using four money market rates and four government bond yields with different maturities as observed on 4 March.2) The money market rate is normally about ¼ percentage point higher than the sight deposit rate.Source: Norges Bank

Forward rate4 March


Chart 4.2 Assumption for the krone exchange rate (I-44). Forward rates. Index1).

80

90

100

110

2001 2002 2003 2004 2005 200680

90

100

110

1) A rising curve denotes a weaker krone exchange rateSource: Norges Bank



Chart 4.3 Projections for CPI-ATE and the output gap1). Per cent.

-2

-1

0

1

2

3

2002 2003 2004 2005 2006-2

-1

0

1

2

3

1) The output gap is a measure of the difference between actual and trend output. See box in IR 1/03


CPI-ATE

Output gap

Chart 4.4 Projected external price movements for some imported consumer goods. Measured in trading partners' currencies. Quarterly figures. Index. 1991 Q1= 100. 1991 Q1 – 2003 Q3

60

70

80

90

100

110

1991 1993 1995 1997 1999 2001 200360

70

80

90

100

110

Sources: EcoWin and Norges Bank

Clothing

Footwear

Audiovisual equipment

Chart 4.5 Consumer goods imports from central Europe1) and China as a share of total consumer goods imports. Per cent. Annual figures. 1990-20032).

0

2

4

6

8

10

12

1990 1992 1994 1996 1998 2000 20020

2

4

6

8

10

12

China

Central Europe

1) Central Europe: Slovenia, Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Slovakia, Poland and Hungary2) Figures for 2003 from January to November Source: Statistics Norway

Chart 4.6 Consumer prices for audiovisual equipment in Norway and other countries. 12-month rise. Per cent. Jan 1995 - Jan 2004.

-15

-10

-5

0

5

1995 1997 1999 2001 2003-15

-10

-5

0

5

Sources: EcoWin and Statistics Norway

Norway

SwedenGermany

Chart 4.7 Indicator of external price impulses to consumer goods measured in foreign currency. Historical developments and projections. Annual figures. 1995-2006

-3

-2

-1

0

1

2

3

1995 1997 1999 2001 2003 2005-3

-2

-1

0

1

2

3

Source: Norges Bank

Chart 4.8 Prices for consumer goods imports in the CPI and in External Trade Statistics projected two quarters ahead, and I-44 projected three quarters ahead. 4-quarter rise. Per cent. 98 Q1 - 04 Q3

-15

-10

-5

0

5

10

1998 2000 2002 2004-15

-10

-5

0

5

10

1) Our estimates: Clothing and accessories, footwear, furniture, food and beverages2) Excluding audiovisual equipment and cars Sources: Statistics Norway and Norges Bank

I-44

Imported consumer goods in External Trade Statistics1)

Consumer goods imports in CPI2)

Chart 4.9 Prices for air travel. Adjusted for taxes. 12-month rise. Jan 2001 - Jan 2004.

-20

-10

0

10

20

30

2001 2002 2003 2004-20

-10

0

10

20

30


Chart 4.10 Annual wage growth1) and unemployment rate2). Per cent. Annual figures. 1993 -2006.

0

2

4

6

1993 1995 1997 1999 2001 2003 20050

2

4

6

1) Average for all groups. Including cost of additional vacation days2) LFS

Sources: Technical Reporting Committee on Income Settlements, Statistics Norway and Norges Bank

Unemployment rate

Annual wage growth

0

1

2

3

4

5

6

7

0 2 4 6 80

1

2

3

4

5

6

7

02-0300-01

98-99

96-97

94-95

Registered unemployed and persons on labour market programmes as a percentage of the labour force

Annu

al w

age

grow

th (i

ncl.

cost

of

addi

tiona

l vac

atio

n da

ys)

Chart 4.11 Annual wage growth and unemployment. 2-year average

04-05

Sources: Technical Reporting Committee on Income Settlements, Directorate of Labour and Norges Bank

Chart 4.12 Expected consumer price inflation in 5 years. Per cent. Quarterly figures. 02 Q2 - 04 Q1

0

1

2

3

4

Jun-02 Dec-02 Jun-03 Dec-030

1

2

3

4

Experts

Employer organisations

Source: TNS Gallup

Employee organisations

Chart 4.13 Expected consumer price inflation in 2 years. Per cent. Quarterly figures. 02 Q2 - 04 Q1

0

1

2

3

4

Jun-02 Dec-02 Jun-03 Dec-030

1

2

3

4

Experts

Employer organisations

Source: TNS Gallup

Employee organisations

Chart 4.14 CPI-ATE. Total and by supplier sector. Historical developments and projections. 12-month rise. Per cent. Jan 2001 - Dec 2006

-6

-4

-2

0

2

4

6

2001 2002 2003 2004 2005 2006 2007-6

-4

-2

0

2

4

6



CPI-ATE


Chart 4.15 CPI-ATE. Historical developments and projections1). Seasonally adjusted 3-month moving average, annualised, and 12-month rise. Oct 2003 - Nov 2004

-3

-2

-1

0

1

2

3

Oct-03 Jan-04 Apr-04 Jul-04 Oct-04-3

-2

-1

0

1

2

3

Projections

1) The columns show 3-month moving average. The curves show the 12-month rise.


Historical

-2

0

2

4

6

2001 2002 2003 2004 2005 2006-2

0

2

4

6

Chart 4.16 CPI and CPI-ATE. Historical developments and projections. 12-month rise. Per cent. Jan 2001 - Dec 2006

CPI

CPI-ATE


Chart 4.17 Projections and uncertainty for CPI-ATE. 12-month rise. Per cent. Jan 2001 - Dec 2006

-1

0

1

2

3

4

5

2001 2002 2003 2004 2005 2006-1

0

1

2

3

4

530% 50% 70% 90%

The bands in the fan indicate different probabilities for developments in the CPI-ATE.


Charts for boxes and appendices

Low external price impulses to the Norwegian economy

Chart 1 Projected external price developments for some imported consumer goods. Measured in trading partners' currencies. Quarterly figures. Index. 91 Q1= 100. 91 Q1 - 03 Q3

60

70

80

90

100

110

120

1991 1994 1997 2000 200360

70

80

90

100

110

120

Source: Norges Bank

Furniture and household appliances

Audiovisual equipment

Footwear

Cars

Other goods

Clothing

Chart 2 Foreign producer prices and a new indicator of external price impulses to consumer goods Measured in trading partners' currencies. Quarterly figures. Index. 1991 Q1=100. 1991 Q1 - 2003 Q3

95

100

105

110

115

120

1991 1994 1997 2000 200395

100

105

110

115

120

Source: Norges Bank

New indicator of external price impulses to consumer goods

Producer prices 25 traditional trading partners

Pass-through from the krone exchange rate to prices for imported

consumer goods

-3.00

-2.50

-2.00

-1.50

-1.00

-0.50

0.00

0.50

1.00

Source: Norges Bank

Earlier estimate

New estimate

Chart 1 Estimated effects on price inflation for imported consumer goods in the CPI-ATE of a 10 per cent sustained strengthening of the import-weighted krone exchange rate. Percentage points

Year 2 Year 3Year 1 Year 4

Chart 2 Historical movements in prices for imported consumer goods and estimated effects of external prices, exchange rate movements and the output gap. Contribution in percentage points to 4-quarter rise. 2001 Q1 – 2003 Q4

-5

-4

-3

-2

-1

0

1

2

2001 2002 2003-5

-4

-3

-2

-1

0

1

2


Contribution from output gap

Contribution from exchange rate

Contribution from external prices

Movements in prices for imported consumer goods

Effect of the fall in interest rates on household income

Chart 1 Interest rates on deposits and loans to households and non-profit institutions in domestic financial institutions. Estimated monthly series. Per cent. Jan 2002 - Dec 2003

0

2

4

6

8

10

Jan-02 Jul-02 Jan-03 Jul-030

2

4

6

8

10

Key rate (sight deposit rate)

Loans in banks

Bank deposits

Source: Norges Bank

Loans in government lending institutions

Loans in mortgage companies and life insurance

The krone exchange rate and exchange rate expectations

Chart 1 Effective exchange rates for Norway, Canada and Sweden1). Index. Week 1 1993 = 100. Week 1 1993 - Week 10 2004

70

80

90

100

110

120

130

140

1993 1995 1997 1999 2001 200370

80

90

100

110

120

130

140

Canada

Sweden

Norway


Sources: Bank of England and EcoWin

Chart 2 Effective exchange rates for Norway, Australia and New Zealand1). Index. Week 11993 = 100. Week 1 1993 - Week 10 2004

70

80

90

100

110

120

130

140

1993 1995 1997 1999 2001 200370

80

90

100

110

120

130

140

Australia

New Zealand

Norway


Sources: Bank of England and EcoWin

Chart 3 Real exchange rates. Deviation from average 1970 -2003. Per cent. Annual figures. 1970 -20041)

-20

-15

-10

-5

0

5

10

15

20

1970 1980 1990 2000-20

-15

-10

-5

0

5

10

15

20

Relative labour costs

Relative prices

1) Based on projections for wage and price inflation for 2004. The krone exchange rate in 2004 is based on the assumptions in IR 1/04 (TWI)

Sources: TRCIS, the Ministry of Finance, Statistics Norway and Norges Bank

2004

Chart 4 TWI and 5-year forward rate1). Daily figures.1 Jan 93 – 4 Mar 04.

90

100

110

120

130

1993 1995 1997 1999 2001 200390

100

110

120

130


Source: Norges Bank

Introduction of inflation targeting

TWI

TWI forward rate

Chart 5 TWI and expected TWI one year ahead1). Monthly figures. June 1998 - Feb 2004

90

95

100

105

110

115

1998 1999 2000 2001 2002 200390

95

100

105

110

115

Expected TWI

TWI

1) A rising curve denotes a weaker krone exchange rate. Expected TWI is based on Consensus Forecasts.

Sources: Consensus Forecasts and Norges Bank

Evaluation of Norges Bank’s projections for 2003

Chart 1 CPI-ATE projections made at different times. 4-quarter rise

0.00

0.50

1.00

1.50

2.00

2.50

3.00

mai. 01 jan. 02 sep. 02 mai. 03 jan. 040.00

0.50

1.00

1.50

2.00

2.50

3.00


3/01

1/03

2/02

1/02 3/02

2/03

3/03Actual

Chart 2 CPI-ATE. Projections and actual developments. Total and by supplier sector. 4-quarter rise. Per cent

-6

-4

-2

0

2

4

6

2000 2001 2002 2003-6

-4

-2

0

2

4

6



CPI-ATE


ActualProjection IR 3/01

Annex 3: Strategy document

-3

0

3

6

9

85 88 91 94 97 00 03-3

0

3

6

9

Chart 1a Real interest rates after tax1). 1985 Q1 - 2003 Q3

5-year rate

3-month rate

1) 3-month rate deflated by CPI excluding energy products up to 1995. Norges Bank's estimates for the CPI adjusted for tax changes and excluding energy products from 1995 to July 2000, then CPI-ATE. The same deflator is used for 5-year government bond yields, but from 2001 Q2 the inflation target of 2.5 per cent is used.


Chart 1b Import-weighted exchange rate (I-44) and trade-weighted exchange rate index1). Monthly figures. Jan 1971 - Oct 2003

70

80

90

100

110

71 74 77 80 83 86 89 92 95 98 01 0470

80

90

100

110


Source: Norges Bank

I-44

TWI

-15

-10

-5

0

5

10

15

20

70 73 76 79 82 85 88 91 94 97 00 03-15

-10

-5

0

5

10

15

20

Chart 1c Real exchange rate. Deviation from average 1970-2002. Annual figures. 1970 - 2003. Per cent

1) Average exchange rate at 23 Oct 2003

Sources: TRCIS, Ministry of Finance, Statistics Norway and Norges Bank

Relative labour costs

Relative pricesOctober1)

Chart 1d CPI-ATE. Total and distributed by imported and domestically produced goods and services1). 12-month rise. Per cent

-6

-4

-2

0

2

4

6

Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03-6

-4

-2

0

2

4

6

1) Norges Bank's estimates




CPI-ATE

Chart 2a Assumption for money market rates. Quarterly figures. 2002 Q1 - 2006 Q4

0

2

4

6

8

2002 2003 2004 2005 20060

2

4

6

8

Source: Norges Bank

Forward rate 23 October

IR 2/03

Chart 2b Assumption for the krone exchange rate (I-44). Quarterly figures. 2002 Q1 - 2006 Q4

85

90

95

1002002 2003 2004 2005 2006 2007

85

90

95

100

Source: Norges Bank

Forward rate 23 October

IR 2/03

Chart 3 Projected CPI-ATE and output gap with forward interest rate and forward exchange rate. Per cent

-1

0

1

2

3

2002 2003 2004 2005 2006-1

0

1

2

3

CPI-ATE(monthly figures)

Output gap (annual figures)


Chart 4 Taylor rate and expected key rates1). Quarterly figures. 2003 Q3 - 2004 Q4

0

1

2

3

4

5

6

7

Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-040

1

2

3

4

5

6

7

1) The expected key rate is estimated on the basis of 3-month FRA rates in Norway and among trading partners on 23 October 03.

Source: Norges Bank

Taylor rate

Expected key rate in Norway

Expected key rate among trading partners

Appendices 4 and 5

0

2

4

6

8

10

1995 1996 1997 1998 1999 2000 2001 2002 2003 20040

2

4

6

8

10

Source: Norges Bank

Sight deposit rate


3-month money-market rate and sight deposit rate. Monthly figures. Jan 1995 - Feb 2004

0

1

2

3

4

5

6

7

1995 1996 1997 1998 1999 2000 2001 2002 2003 20040

1

2

3

4

5

6

7

1) Theoretical ECU rate up to December 1998

Source: Norges Bank

Euro area1)

US

Japan

3-month rates in the US, the euro area and Japan. Per cent. Monthly figures. Jan 1995 - Feb 2004

85

90

95

100

105

110

115

1995 1996 1997 1998 1999 2000 2001 2002 2003 200485

90

95

100

105

110

115

Source: Norges Bank


(1995=100

Trade-weighted exchange rate index, TWI (1990=100)

Trade-weighted exchange rate index and import-weighted exchange rate I-44. Monthly figures. Jan 1995 - Feb 2004

0

5

10

15

1997 1998 1999 2000 2001 2002 2003 20040

5

10

15

Source: Norges Bank

Credit to households

C2

The credit indicator (C2), credit to households and total credit to the non-financial private sector and municipalities, mainland Norway (C3). 12-month rise. Per cent. Monthly figures. Jan 1997 - Jan 2004

C3 mainland Norway

0

2

4

6

8

10

2001 2002 2003 2004 2005 20060

2

4

6

8

10

Assumption for money market rate. Forward rate. Per cent

Source: Norges Bank

Forward rate4 March


Assumptions for the krone exchange rate (I-44). Forward rates. Index

80

90

100

110

2001 2002 2003 2004 2005 200680

90

100

110

Source: Norges Bank



charts for inflation report 1/2004. summary chart 1 projections for cpi-ate 1) and the output gap...

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