that is now close to zero. growth in demand and output is expected to remain high in the near term. unemployment may fall somewhat more quickly than has been the case over the past year. the output gap is expected to be positive in 2005. higher demand for companies ’ goods provides scope for increasing prices. experience shows that inflation is directly influenced by the level of capacity utilisation in the norwegian economy. some of the rise in prices for domestically produced goods and services can be attributed to higher margins in the business sector. the effects of the interest rate decline on demand, output and employment have been pronounced. it has taken time for inflation to pick up. this partly reflects low external interest rates and high oil prices, which have moderated the impact on the krone exchange rate. higher imports from low - cost countries, competition and improved efficiency in norwegian production have also kept inflation at a low level. initially, it was the fall in prices for imported consumer goods that pushed down underlying inflation. after a period, the rise in prices for domestically produced goods and services also decelerated. this was due in particular to increased competition in some goods and service markets. at the same time, wage growth slowed as a result of lower capacity utilisation in the economy. a slower rise in house rents also contributed. inflation measured by the cpi - ate reached its lowest level in the first months of 2004. inflation remained at less than ½ per cent until after the summer before picking up in autumn. inflation moved up primarily as a result of a slower decline in prices for imported consumer goods, but the depreciation of the krone since the beginning of 2003 has also contributed. in addition, the rise in prices for domestically produced goods and services stabilised, and towards the end of 2004 there was a tendency towards a higher rise in prices for these goods and services. at the beginning of 2005, inflation measured by the cpi - ate was lower than expected. prices for imported consumer goods fell more than expected. it is uncertain whether this price decline was due to abnormal seasonal patterns or a fall in underlying inflation. the fall in prices may be related to an unusually warm winter, which has made it more difficult to sell winter clothing and sports equipment at ordinary prices. on the other hand, there are indications that prices for imported consumer goods in foreign currency may have fallen somewhat more than previously assumed. the wide variations in prices for some imported consumer goods, especially clothing and footwear, may entail wide monthly variations in

second, consumers are in better financial shape. households are carrying less debt, with total household liabilities roughly $ 500 billion below their cyclical peak in 2008. moreover, lower interest rates have facilitated significant mortgage debt refinancing, which has lowered the household debt service burdens. depending on the particular measure used, household debt service burdens relative to income have fallen back to levels last seen in the 1980s and 1990s. in addition, household net worth has recovered sharply, boosted primarily by higher financial asset valuations, but also by some recovery in home prices. third, the fiscal restraint that has held back growth in recent years has ended, with the federal budget deficit now at a level consistent with a stable to slowly declining federal debtto - gdp ratio. in the aggregate, state and local governments have also ended their retrenchment. one important piece of evidence in this regard is the fact that state and local see, for example, the latest blue chip consensus survey ( volume 39, no. 11, november 10, 2014 ). the median real gdp forecast for 2015 ( fourth quarter over fourth quarter ) is 2. 9 percent. bis central bankers ’ speeches government employment is now rising at between 5, 000 and 10, 000 per month, after generally contracting during the 2009 to 2012 period. now that these headwinds have subsided, buoyant financial market conditions spurred, in part, by a very accommodative monetary policy should do more to support economic activity. in particular, compared to historical patterns, the current household net worth - to - income ratio is high relative to the personal saving rate. this suggests some scope for a decline in the household saving rate. if this were to occur, consumption growth would outstrip income growth. similarly, financial market conditions are conducive to sustained gains in business fixed investment. equity prices are high, borrowing costs are low, cash flows are strong and corporate balance sheets are healthy. another positive development for both the u. s. and the global economy is the sharp decline in energy prices. let ’ s start with the u. s. perspective. despite the impressive recent gains in natural gas and crude oil production, the u. s. still is a net importer of energy. as a result, falling energy prices are beneficial for our economy. in economist parlance, falling energy prices are a positive “ terms of trade ” shock for the u. s. over the near - term, this will lead to a