With few exceptions, all the advanced economies were already in a net debt position and many are now facing funding problems related to an aging population. If the global economy is to recover from the crisis, government debt must be stabilised fairly soon in order to prevent a string of crises in state finances. Norway is in a unique position due to government petroleum revenues. Monetary and fiscal policy have stimulated domestic demand and output. Growth in mainland GDP was higher in the second quarter than projected in the June Monetary Policy Report. Household consumption seems to be picking up again. Petroleum industry activity has also had a stabilising effect on the Norwegian economy. There are plans to develop a number of oil fields on the Norwegian continental shelf in the years ahead, but it is likely that these investments will require an oil price of more than USD 60–70 per barrel to be profitable. BIS Review 115/2009  3  The events of September 2009 spread rapidly to the firms in Norges Bank’s regional network. In August 2009, manufacturing enterprises reported that growth would hold up. In November, the turnaround was described as a “heart attack”. Norges Bank established its regional network in 2002. Regular interviews provide information about enterprises’ assessment of the economic outlook before other official statistics are available. This information is therefore an important part of the decision-making basis in the formulation of monetary policy. Statistics Norway’s quarterly national accounts are available about 50 days after the end of the quarter.

Norges Bank’s Executive Board decided in June that the key policy rate should be in the interval ¾-1¾ per cent in the period to the publication of the next Monetary Policy Report on 28 October 2009, unless the Norwegian economy is exposed to new major shocks. In the assessment forming the basis for its monetary policy decision of 23 September, the Executive Board placed emphasis on underlying inflation, which is now below the inflation target. The krone has appreciated and will, in conjunction with continued low imported inflation, contribute to keeping inflation below target in the year ahead. This suggests that the key policy rate should be kept low for a period ahead. Growth in the Norwegian economy has picked up at a more rapid pace than was expected a few months ago. High activity in the oil industry and monetary and fiscal policy measures have contributed to supporting demand for goods and services. Employment is stable and it appears that unemployment will be considerably lower than expected, despite the decline in manufacturing and the building and construction industry. Low interest rates are contributing to renewed growth in household consumption. Higher capacity utilisation and low productivity growth may increase upward pressure on costs, pointing towards somewhat higher inflation and suggesting that the key policy rate should be raised earlier than projected in the June Monetary Policy Report. On balance, it was appropriate to keep the key policy rate unchanged at this meeting, although the Executive Board considered the alternative of increasing the key policy rate.