Why was productivity in intangible-intensive industries hit the most by the global financial crisis? And how do these trends differ in the United Kingdom relative to its international counterparts? Further work to answer these questions will have important implications for the long-term policy landscape. There’s an old dictum, sometimes attributed to Dwight Eisenhower, that “what is important is seldom urgent and what is urgent is seldom important”. Whatever its providence, there are certainly exceptions to this rule. The recent sequence of extremely large shocks to the global economy and the implications for inflation and activity clearly qualify as both urgent and important. They are the dominant theme for monetary policy deliberations around the world, as I said at the start of this speech. While not urgent, in the sense of shaping the near-term course of monetary policy, understanding the structural trends I have discussed today is no less important. Indeed their effects may be felt for decades to come. Thank you. I would like to thank Ambrogio Cesa-Bianchi, Saba Farooq, Marco Garofalo, Richard Harrison, Karen Jude, Nick McLaren, Sophie Piton, Rana Sajedi and Alison Schomberg for their assistance in preparing these remarks. I am also grateful to Saleem Bahaj, Stuart Berry, Alan Castle, Maren Froemel, Andy Haldane, Jonathan Haskel, Sara Holttinen, Peter Goodridge, Clare Macallan, Catherine L. Mann, Josh Martin, Marko Melolinna, Huw Pill, Lukasz Rachel, Michael Saunders, Martin Seneca, Fergal Shortall, Sophie Stone, James Talbot, Silvana Tenreyro and Gavin Wallis for insightful comments and discussions.

Through 2003, the interest rate differential has narrowed as a result of monetary policy easing. This has also contributed to a substantial depreciation of the krone. In Norway, internationally oriented business sectors, such as the ICT sector and the travel industry, have been particularly affected by weak global developments. Expectations concerning future earnings have been revised downwards substantially in these sectors. This has led to cost cuts and  2  BIS Review 43/2003  redundancies. Combined with a deterioration in competitiveness and lower activity in manufacturing, this has resulted in rising unemployment in the last year. Public agencies have had limited opportunities to increase service production because wages have risen. Some municipalities and other government agencies have reduced the number of employees. While real economic activity has declined and unemployment has increased, inflation in Norway is now low. The rise in consumer prices adjusted for taxes and excluding energy products (CPI-ATE) has slowed, primarily due to developments in prices for imported consumer goods. Low inflation is a consequence of the appreciation of the krone throughout last year and low inflation abroad. The rise in prices for domestically produced goods and services has also slowed. This particularly applies to prices for domestically produced goods influenced by world market prices. In August, the year-on-year rise in the CPI-ATE was 0.9 per cent, after having been down to 0.7 per cent one month earlier. This was slightly lower than projected in the last Inflation Report and considerably lower than the inflation target of 2.5 per cent.