Mr Gjedrem reports on the Norwegian economy and monetary policy in Norway
Speech given by Mr Svein Gjedrem, Governor of the Norges Bank, at the Royal Norwegian Embassy,
in London on 28 October 1999.
* * *
1. Introduction
Ambassador, ladies and gentlemen, I am happy to have this opportunity to speak to you about
monetary policy in Norway. What happens in the financial community in London is important to the
Norwegian economy: the financial markets here provide substantial loans for Norwegian firms, and
are at the same time an important recipient of Norwegian financial investments. Short-term capital
movements between United Kingdom and Norway are also important. Against this background, I
would like to share with you information about the Norwegian economy. My focus will be on
explaining distinctive aspects of the Norwegian economy, which is based largely on a limited number
of commodities. My hope is that this understanding may help market operators to make informed
decisions when dealing with Norwegian markets.
2. Background
Trend GDP growth in the Norwegian mainland economy is about 2-21⁄4%, and the inflation rate is
around 2%. GDP per capita is slightly higher than in most other European countries. The high level of
per capita income is partly a result of extensive revenues from oil and gas extraction. These revenues
also allow Norway to operate with a substantial current account and government budget surplus.
Extraction of North Sea oil started in the 1970s, and the production volume has increased over the
years. The petroleum sector employs only a small part of the total labour force, but brings in
substantial revenues. A main question for Norwegian economic policy is therefore how to stabilise the
Norwegian economy in the face of high, fluctuating revenues from the petroleum sector.
3. The importance of the petroleum sector
Some figures will illustrate the importance of the petroleum sector in the Norwegian economy. Oil
production started in the 1970s and has gradually increased. Given the current estimates for existing
resources, production is expected to be at its maximum level between the years 2000 and 2010, and
then decrease gradually as the remaining resources are reduced. The level of future oil production is
highly uncertain.
Employment in the petroleum sector and related industries is only around 4% of total employment.
Investment in the petroleum sector has been substantial compared to investment in the rest of the
economy, and as a share of GDP.
Investment has an import share of about 1/3, which means that investment relating to the petroleum
sector has had a substantial effect on industries in mainland Norway.
The income from petroleum extraction is of substantial significance to the Norwegian economy and to
the public sector in particular. In the 1990s the export value of oil has been around 1/3 of total exports
excluding ships and oil rigs.
The petroleum sector is an important source of revenues for the government, both through taxes and
through direct government ownership.
Chart 1 Petroleum production. In mill. Sm3 o.e.
300 300
Projections
250 250
200 200
150 150
100 100
50 50
0 0
1970 1980 1990 2000 2010 2020 2030
Source: NB 2000
Legg inn filadresse her
Chart 2 Export value of oil as a share of total
exports excluding ships and oil rigs. Per cent
50 50
40 40
30 30
20 20
10 10
0 0
Chart 3 Government net cash flow from the
petroleum sector as a share of GDP. Per cent
10 10
8 8
Projections
6 6
4 4
2 2
0 0
1980 1990 2000 2010 2020 2030
Source: NB 2000 and Norges Bank
Legg inn filadresse her
Chart 4 Government budget surplus and
Petroleum Fund surplus. In billions of NOK
Ex. oil Total
Projections
120 120
80 80
40 40
0 0
-40 -40
-80 -80
Projections indicate that revenues will remain at about the same level until around 2008, when they are
expected to gradually decrease as petroleum production declines.
The Norwegian Government runs a budget surplus including petroleum revenues.
The columns show the budget surplus (or deficit), excluding petroleum revenues. The line represents
total net government surplus, which is transferred to the Government Petroleum Fund. The surplus
also includes yields on Fund investments. We note that the amount of petroleum income used to
finance public expenditure varies from year to year, while a large portion of the income is saved.
Oil prices and hence petroleum revenues fluctuate over time.
Chart 5 The price of crude oil. USD per barrel
50 50
40 40
30 30
20 20
10 10
0 0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98
Source: Norges Bank
Legg inn filadresse her
After a period of high prices in the 1970s, when OPEC first demonstrated its power, and the early
1980s, oil prices have been fairly stable.
Focusing on the last 15 years, somewhat larger fluctuations have been observed since 1997. In 1998
the price of oil dropped temporarily below $10 per barrel. This year the price has increased
substantially above the $15 to $17 a barrel price range that we consider a more "normal" level.
4. Fluctuating oil prices and economic stability: Dutch disease and the Government
Petroleum Fund
Oil revenues increase consumption possibilities. However, it is a challenge to manage these resources
in a way that increases welfare for current and future generations. A rapid expansion of the sheltered
sector based on uncertain and perhaps temporary increases in petroleum revenues may lead to the
situation called Dutch disease.
The impact of oil price fluctuations on the exchange rate and on economic stability in general will
depend on the speed at which petroleum revenues are used. In general, income can either be used now,
or saved by accumulating assets abroad, so as to redistribute the increased income and thus
consumption between generations. The income can be used to increase net imports while resources
from the internationally exposed sector are transferred to the sheltered sector. This will allow for
increased consumption of both exposed and sheltered sector goods. If petroleum revenues are to be
used for increased sheltered goods consumption, a real exchange rate appreciation will be needed to
initiate the reallocation of resources to the sheltered sector. The extent of the reallocation will depend
on how fast the revenues are used and how much is saved for future consumption.
Suppose, as one extreme, that all income entering the government budget were used in that same
period. This means that an increase in the oil price would increase government income and domestic
demand, encouraging a reallocation of resources from the exposed to the sheltered sector. If the oil
price fell again later, Norway would be left with an exposed sector that is too small, resulting in a
current account deficit and expectations of an exchange rate depreciation that would be needed to
restore the exposed sector.
Such fluctuations in the use of oil revenues would lead to considerable instability in the Norwegian
economy and large fluctuations in the exchange rate over time. Norwegian economic policy is
organised to counteract such instability.
The key issue is to prevent increased petroleum revenues from leading directly to increased
government consumption, in other words to reduce the dependence of government spending on oil
revenues. The share of government spending financed by oil revenues varies over the business cycle.
For the past few years this share has averaged around 3% and it is expected to be kept at about that
level over the coming years. To this end, Norway has created the Government Petroleum Fund, which
receives revenues from the petroleum sector, transfers the amount necessary to produce a balanced
government budget and invests the surplus abroad. As long as the increase in petroleum income is kept
outside the domestic economy, there will be less need for structural change and thus less need for
exchange rates to change.
The Petroleum Fund serves many purposes. It is a means of storing wealth and redistributing income
from oil extraction between generations, of buffering against changes in oil prices, and of facilitating
demand management. Thus, the Fund facilitates the fiscal policy tasks of maintaining the desired size
of the exposed sector and stabilising the economy.
Chart 6 Objectives of the Government Petroleum
Fund
Allocate wealth
•
Distribute income over generations
•
Serve as a buffer against variability in oil prices
•
Provide financial leeway for stabilisation
•
North Sea oil and gas reserves are part of Norway's economic wealth. Extracting the oil and allocating
the revenues to the Petroleum Fund is a way of transforming this wealth into financial assets abroad.
The purpose of accumulating capital in the Fund is to redistribute petroleum revenues between
generations and ensure the long-term stability of state finances. The larger the Fund, the less
dependent Norway will be on petroleum revenues in the future, and the more prepared we will be to
meet the challenge of an ageing population.
Furthermore, the Petroleum Fund acts as a buffer against short-term variations in petroleum revenues
by separating the cash flow from oil extraction from current expenditure. Since a large share of the
revenues from petroleum activities accrues to the state, any fluctuations in oil prices will primarily
result in changes in allocations to the Fund. Since all of the Fund's capital is invested abroad, such
changes will in principle not influence economic activity. This makes the Norwegian economy more
robust to oil price fluctuations, thereby reducing oil dependence in the short term.
To illustrate the importance of the buffer function, let us assume that the oil price shows a temporary
rise of NOK 10 per barrel, or a little less than USD 1.50 per barrel, lasting for about a year. This is a
small change in the oil price, well within normal variations from one year to the next. Government
revenues - and hence the budget surplus - would then increase by around NOK 10 billion in the first
year and NOK 12-13 billion the next year. This corresponds to around 1% of Norway's annual GDP.
By comparison, annual trend growth in the mainland economy is slightly over 2%. Note that a price
increase on the margin will be reflected mainly in an increase in government revenues and will have
limited effect on private sector incomes. This means that the effect of the price increase on the
Norwegian economy depends on how the government spends the additional revenues. If they are
absorbed into the economy through higher expenditure or reduced taxes, when the economy is already
nearing capacity, such a policy would rapidly lead to substantial pressures on resources in the
economy. This would translate into an acceleration of wage and price inflation and unstable conditions
in the foreign exchange market. The Petroleum Fund is designed to channel the revenues resulting
from an increase in the oil price to the Fund for investment abroad, in order to prevent an increase in
oil prices from influencing the budget. The increased revenues would thus not have an impact on the
domestic economy, but be invested abroad through the Petroleum Fund.
The current account balance and government budget surplus show that Norwegian consumption has
adjusted to petroleum wealth by increasing net imports and by maintaining a budget deficit excluding
petroleum revenues. At the same time some of the wealth is saved abroad to redistribute income
between generations. This means that there has already been a gradual resource reallocation from the
exposed to the sheltered sector. As long as consumption is fairly well adjusted to the expected level of
the petroleum wealth, there may not be a need for substantial exchange rate movements in the near
future to achieve further adjustment.
5. Stability of the Norwegian krone
Let us turn to the stability of the krone. People in the banking industry often suggest that the krone is a
petro currency fluctuating widely with the price of oil. Is this the case, or has stabilisation policy been
successful in Norway so far?
Looking at the data, we note that the krone exchange rate has been fairly stable over time. Since 1986
the authorities have focused on stability of the krone exchange rate. From 1986 to 1992 Norway had a
fixed exchange rate system with a defined central rate with fluctuation margins. This system was
abandoned in 1992 after extensive speculation against the krone during the period of unrest in
European exchange markets. Following the decision to allow the krone to float on 10 December 1992,
the guidelines for monetary policy were revised. Monetary policy was subsequently oriented towards
exchange rate stability, but without stipulating a central rate with fluctuation margins.
The krone depreciated slightly immediately after the crisis, but then remained stable without extensive
use of Norges Bank's instruments. Since 1996, the exchange rate has fluctuated more widely. There
may be several reasons for this. During part of this period, the government budget has not contributed
sufficiently to smoothing growth in domestic demand and production. Wage inflation in 1997 and
1998 was higher than in other countries. Turbulence in international financial markets has also had an
important contagion effect on the krone. In addition, oil revenues have fluctuated, which may have
affected investors' expectations regarding future developments in the Norwegian economy.
Chart 7 Krone exchange rate
75 6,0
Basket index
80
6,5
ECU index
85
7,0
90
Euro
7,5
95
100 8,0
105
8,5
110
9,0
115
80 82 84 86 88 90 92 94 96 98
Source: Norges Bank
Legg inn filadresse her
The pressure against the krone exchange rate was particularly strong in the autumn of 1998. The crisis,
first in Asia and later in Russia, led to considerable turbulence in international markets. At the same
time, pressure in the labour market led to high wage increases, while the current account was
negatively affected by a fall in export prices, combined with increases in imports. All in all, these
factors contributed to creating depreciation expectations. Thus, fluctuations in oil prices represent only
one of many causes of exchange rate variability over the past few years.
Monetary policy is aiming at exchange rate stability. The krone exchange rate depreciated gradually
through the first half of 1998, and in August there was a strong pressure against the krone. Norges
Bank responded by increasing its key rates seven times through 1998, with a total of 41⁄2 percentage
points. After the last interest rate increase, in August 1998, the interest rate on banks' deposits in
Norges Bank was 8%. The strong increase in interest rates was not sufficient to bring the exchange
rate back to its initial range. However, Norges Bank evaluated that further interest rate increases would
not lead to a further appreciation of the krone, as a higher interest rate might contribute to a recession
and thereby destabilise the economy. This would not be a credible monetary policy.
In 1999 the economy has been cooling off, wage settlements have been moderate, and oil prices have
increased again. The krone has returned to its initial range, while interest rates have been cut by a total
of 2.5 percentage points this year, by 0.5 percentage point each time. The last cut was on
22 September, when the interest rate was reduced to 5.5%.
Since 1992 the nominal value of the krone has remained close to the same level. Moreover, the
average inflation rate in the 1990s has been 21⁄4%, indicating real exchange rate stability. Thus, the
exchange rate has been surprisingly stable in the face of fluctuating oil revenues.
We can conclude that the exchange rate has been fairly stable over a long period. However,
developments in recent years indicate that Norges Bank cannot fine-tune movements in the krone
exchange rate. Norges Bank will therefore focus on factors determining long-term exchange rate
stability.
Chart 8 Norges Bank's key rates
12 12
10 10
8 8
Overnight
lending rate
6 6
1-week rate
4 4
Deposit rate
2 2
0 0
1996 1997 1998 1999
Source: Norges Bank
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6. The mandate
Let us turn to the mandate for monetary policy and how Norges Bank interprets its role and
responsibilities. The political authorities formulate Norges Bank's mandate for the conduct of
monetary policy. The mandate is laid down in the Exchange Rate Regulation, adopted by Royal
Decree of 6 May 1994. Section 2 of the Regulation states:
Chart 9 The Regulation of May 6, 1994
"The monetary policy to be conducted by Norges
•
Bank shall be aimed at stable exchange rates against
European currencies, based on the exchange rate
maintained since the krone was floated 10 December
1992."
significant changes
• "In the event of in the exchange
with a view
rate, policy instruments will be oriented
to returning the exchange rate over time to its initial
range. No fluctuation margins are established, nor is
there an appurtenant obligation on Norges Bank to
intervene in the foreign exchange market."
The first sentence in the Regulation indicates that we have a managed float of the krone, based on the
range of the exchange rate maintained since the krone was floated in December 1992. Instruments are
to be oriented towards maintaining a stable krone exchange rate against European currencies. Norges
Bank has chosen to define the term European currencies as the euro from 1 January 1999.
The Regulation does not stipulate a central rate with specific fluctuation margins. Norges Bank
interprets the concept initial range as a broad indication of a central rate around which the krone can
fluctuate.
The second sentence refers to significant changes in the exchange rate in relation to the initial range. It
is important to note that the concept significant changes is not quantified. Significant must therefore be
given an economic content. A reasonable interpretation is that a significant change is a change that
influences expectations concerning price and cost inflation to the extent that changes in the exchange
rate become self-reinforcing through a wage-price spiral.
The expressions with a view to, over time, aimed at and based on also show that Norges Bank has
considerable latitude for exercising discretion.
7. The instruments
Monetary policy is conducted through two main instruments - exchange-market interventions and the
Bank's key interest rates. Interventions influence the supply of kroner in the exchange market. A
change in interest rates influences both conditions in the exchange market and total demand and
production. Monetary policy may thus influence price and cost inflation through both these channels.
In Norges Bank's experience, extensive exchange-market interventions have yielded poor results. If
the central bank intervenes heavily to defend the krone, this may evolve into a game situation in which
market participants perceive central bank interventions as an interesting opportunity to make a profit.
Market agents know that a situation in which the krone is being propped up because Norges Bank is
intervening cannot be sustained. It is then tempting to take positions in the foreign exchange market
against the central bank. This implies that heavy interventions may intensify the pressure on the krone
over time, steadily increasing the necessary volume of interventions. If market participants assume
that Norges Bank will use the interest rate to defend specific exchange rate levels, this may lead to a
similar game situation.
Norges Bank does not intend to behave in a way that will prompt such game situations. However, the
Bank may use interventions to a limited extent if the exchange rate moves substantially out of line
with what we consider to be reasonable on the basis of fundamentals, or in the event of exceptional
short-term volatility in thin markets. In such circumstances, there is less risk of ending up in a game
situation against exchange market agents.
Norges Bank's most important instruments are its two key rates - the interest rate on banks' deposits
and the overnight lending rate. Experience shows that the central bank's key rates have a fairly
substantial impact on money market rates at the very short end of the market, i.e. overnight and
one-week rates. The effect on interest rates on financial instruments with longer maturities is not as
direct. Here, expectations concerning the central bank's course of action and general confidence in
monetary policy play a role, as does the level of very short-term rates.
Money market rates influence the krone exchange rate directly through the return that can be achieved
on krone positions, but also indirectly through the effect on the outlook for the real economy and price
and cost inflation in Norway. A higher interest rate will, therefore, normally result in an appreciation.
Both the appreciation and the interest rate increase will lower demand. The appreciation will also in
itself lead to lower inflation on imports, while lower demand will reduce the general inflation level.
Over time both the inflation rate and the activity level will influence the exchange rate. Thus, Norges
Bank needs to exercise discretion in monetary policy by considering the effects of interest rate changes
not only directly on the exchange rate, but also on the rest of the economy, and to focus on the
fundamental conditions for exchange rate stability over time.
Chart 10 How interest rates affect the economy
Exchange rate
•Demand &
production
NBs •Market interest rates
•Loans, investment,
interest •Lending and deposit
share prices
rates rates
•Wages and prices
•External balance
Legg inn filadresse her
8. Exercising discretion in monetary policy
The mandate stipulates the objective of monetary policy, but Norges Bank has to choose how to
achieve the objective. As shown, the krone exchange rate has fluctuated in recent years in spite of
Norges Bank's active use of instruments, indicating that Norges Bank cannot fine-tune movements in
the krone exchange rate.
The exchange rate will also in the future be influenced by factors that are not under the control of
Norges Bank, like fluctuations in international financial markets, the evolution of the price of oil,
fiscal policy, and developments in domestic prices and costs. Thus, in its use of the interest rate
Norges Bank focuses on the preconditions for stability of the krone exchange rate over time.
The interest rate affects the exchange rate directly through returns on holding kroner, but also
indirectly through the effects of the interest rate on inflation and output. More specifically, stability of
the exchange rate requires that:
• Price and cost inflation must be brought down to the level aimed at by euro countries.
• Monetary policy must not in itself contribute to deflationary recessions, as this would
undermine confidence in the krone.
Let me explain in more detail. Suppose that price and cost inflation in Norway were allowed to be
higher than in the euro countries. The nominal exchange rate would then have to depreciate in order to
keep the real exchange rate constant over time. Thus, stabilising inflation at around the level aimed at
by the ECB is a means of achieving exchange rate stability against the euro.
In a situation with the prospect of increased inflationary pressure and a depreciating exchange rate, an
increase in the interest rate may at the same time bring the exchange rate back towards its initial range
and reduce inflationary pressure through lower demand and lower imported goods inflation. This in
turn will contribute to long-run stability in the exchange rate. Similarly, with an appreciating exchange
rate and a low inflation and activity level in the economy, a lower interest rate will contribute to
stabilising the exchange rate in both the short run and the long run through a stable inflation level.
On the other hand, we can think of situations where we would need to set a high interest rate in order
to keep the exchange rate close to the initial range in the short run, creating a deflationary recession in
the economy. Normally, a deflationary recession will lead to a weakened krone exchange rate, which
means that the high interest rate set to keep the level of the exchange rate unchanged in the short run in
itself will induce exchange rate instability in the long run. Similarly, the opposite situation may occur,
where a low interest rate is required to keep the exchange rate stable in the short run, creating
inflationary pressure in the economy. In both situations, however, a policy aimed at stabilising the
exchange rate in the short run will weaken the basis for exchange rate stability over time. Hence,
Norges Bank cannot with open eyes set interest rates to levels where monetary policy in itself
contributes to a higher inflation or a deflationary recession, which would undermine the confidence of
the krone.
Chart 11 Preconditions for exchange rate stability
Inflation at the level of the Euro countries
•
Monetary policy should not contribute to a
•
deflationary recession
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If price and cost inflation is in line with the level aimed at by the euro countries, one of the
fundamental conditions for exchange rate stability is satisfied. In spite of this, the exchange rate may
be perceived as "too strong" or "too weak" in relation to the initial range. This may be due to
conditions in the real economy, which could imply a real appreciation or real depreciation of the
krone. The background for such changes in the exchange rate may be that the cost competitiveness of
Norwegian industry has to be adjusted and that the equilibrium range of the krone exchange rate has
changed. In this situation Norges Bank should carefully evaluate the reasons for exchange rate
movements. If we have reason to believe that the exchange rate will remain permanently strong or
weak, Norges Bank will inform the authorities that measures other than those available to the Bank are
required.
We note, however, that the present exchange rate level has more or less prevailed for more than
10 years. On the basis of its analyses, Norges Bank does not find grounds for regarding this level as
inappropriate.
9. How does the Norwegian regime differ from inflation targeting?
Price stability is an important part of long-term exchange rate stability, and the setting of interest rates
will often be the same whether the goal is exchange rate or inflation targeting. However, Norwegian
monetary policy differs in some respects from monetary policy in countries with an inflation target.
• Norway has a long tradition of cooperation between the political authorities and social
partners. Income and wage determination is fairly centralised, and the social partners
evaluate the effects of wage outcomes on employment.
• In a number of countries that have switched to a monetary policy regime based on inflation
targeting, fiscal policy is oriented towards reducing government debt and deficits. A passive
fiscal policy implies that in practice monetary policy assumes a greater role in stabilising the
economy. In Norway fiscal policy has an important role in demand management. The
fulfilment of this task is facilitated by the fact that the Norwegian government has greater
financial leeway than most other countries due to its oil revenues. Fiscal policy has been
fairly well adapted to the economic situation over the last decade. The active role it has
played in demand management has functioned as an anchor for fiscal discipline. The
Government Petroleum Fund is meant to be a buffer against changes in the terms of trade. In
other countries this role must be filled by the exchange rate.
Chart 12 How does the Norwegian regime differ
from inflation targeting?
• Co-operation:
- Tradition of co-operation between political authorities and
social partners
- Wage-setting considering employment effects
• Fiscal policy:
- Fiscal policy has financial leeway for stabilisation policy
- Petroleum Fund buffer against terms of trade variability, not
the exchange rate
• Monetary policy:
- Different formulation of target
- Different institutional setting
Legg inn filadresse her
• Monetary policy in Norway is oriented towards stability of the exchange rate and not an
explicit inflation target. The setting of interest rates will more or less be the same. Norges
Bank focuses on keeping a low rate of inflation and on avoiding a situation in which
monetary policy in itself contributes to a recession that may threaten the fundamental
conditions for stability of the krone.
• The institutional set-up for monetary policy in Norway is different. In a country with
inflation targeting, the central bank will inform the political authorities if the inflation target
is not met. In Norway, Norges Bank will inform the authorities that measures other than
those available to the Bank are required if a situation arises where we are unable to return the
exchange rate to its initial range without causing inflation or a deflationary recession. This
implies a greater focus in the conduct of fiscal policy on factors that influence the exposed
sector of the economy. This is consistent with our concern that the economy may run into a
Dutch disease.
10. Economic developments
From looking at the principles of Norwegian economic policy, let us turn to Norges Bank's view of
the current situation. The high and steady rate of growth from 1992 and onwards has been moderated
this year. The overall picture indicates that the exchange rate is stable, while the economy is showing
signs of cooling off.
Each quarter Norges Bank presents an inflation report with an assessment of the outlook for the
Norwegian economy and for price inflation for the next two years. The projections in the Inflation
Report provide a basis for the Bank's conduct of monetary policy.
The Inflation Report published in September indicates that price and cost inflation in Norway will
gradually slow to the level aimed at in the euro area. Among other things, this is based on the
assumption that growth in public expenditure will be approximately in line with the trend rate of
growth in the mainland economy.
For 1999 Norges Bank expects a growth rate of 1⁄2%. Growth is anticipated to be low also next year
and approach trend growth in 2001. Demand growth could be higher than expected, which would
contribute to maintaining the pressure in the labour market. Employment is still high and near capacity
level, while we see a tendency towards higher unemployment in sectors such as the construction and
engineering industries.
Chart 13 Unemployment rate. Per cent
6 6
5 5
4 4
3 3
2 2
1 1
0 0
80 82 84 86 88 90 92 94 96 98
Source: SSB
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Inflation is expected to remain at around 2% for the next two years, with inflation rates of 21⁄4% this
year, 2% next year and 13⁄4% in 2001.
Chart 14 shows the key technical assumptions underlying Norges Bank's projections. Short-term
interest rates are assumed to move in line with market expectations, as reflected in forward rates in
September (Chart 15). According to market expectations, the differential against European rates will
narrow from the current level of a little more than 3 percentage points to around 1 percentage point at
the end of 2001. The krone exchange rate is assumed to be NOK 8.30 against the euro throughout the
projection period.
Developments, as indicated by Norges Bank's analyses, imply that there is little room for further
decreases in interest rates. It is more likely that the next change will involve a reduction rather than an
increase. If developments are in line with expectations, any further reduction will, however, be smaller
than the reductions implemented so far.
Chart 14 Technical assumptions
• Oil price gradually falls to 120 kroner per barrel
2 per cent real growth in public expenditure this
•
year
Krone exchange rate 8.30 kroner per euro
•
Short term interest rates follow market
•
expectations
Legg inn filadresse her
Chart 15 Technical assumption concerning money
market rates
IR 99/3
6 6
IR 99/2
4 4
2 2
0 0
1999 2000 2001
Source: Norges Bank
Legg inn filadresse her
BIS Review 121/1999 14
Norges Bank has changed its procedures this year. The goal is to achieve predictability and
transparency. Each month the Executive Board of the Bank discusses monetary policy. The dates for
the monthly meetings are announced ahead of time. Changes in interest rates will normally be decided
at these meetings. After each meeting there is a press release at 2 p.m. and a press conference at 4 p.m.
The quarterly Inflation Report presents analyses that provide a basis for the Bank's conduct of
monetary policy.
Additional information from Norges Bank in English, such as articles and speeches, is available on
Norg