currency. the fragility of the norwegian krone was illustrated when investors fled the currencies of small countries, and the krone weakened considerably. when speculators withdrew, daily fluctuations increased and hedging against exchange rate volatility became more expensive. the krone fell to a record - low level in december last year, but has appreciated since then. consumer price inflation reached a peak in october of 2008, but has slowed markedly thereafter and was 2. 5 per cent in february. underlying inflation is still above target and stood at approximately 3 per cent in february. looking forward, inflation will abate. norges bank has over a number of years focused on anchoring inflation expectations around the target of close to 2. 5 per cent over time and has given weight to predictability, with a recognisable response pattern. the downturn has not affected long - term inflation expectations to any great extent. according to an expectations survey, inflation expectations five years ahead among experts in the financial industry, the social partners and academia were virtually unchanged from the fourth quarter of 2008 to the first quarter of 2009. after a prolonged upturn, both output and employment are falling in norway. the turnaround had already occurred just over a year ago, but in the period to autumn last year, it appeared that capacity utilisation would gradually decrease to a normal level. as the global economic outlook deteriorated, it became clear that the slowdown in our economy would occur more rapidly and be more pronounced than envisaged earlier. in november, regional network contacts reported an abrupt and marked turnaround in activity. they now report that the labour supply is no longer a constraint on production. the enterprises in the network are expecting output and employment to fall further over the next six months. unemployment has increased since autumn last year, but is still at historically low levels. unemployment is projected to rise to almost 5 per cent at the end of the year. wage growth is expected to come down this year from a high level in 2008. lower corporate profitability, rising unemployment and lower consumer price inflation will probably result in low negotiated pay increases this year. the export sector has been particularly hard hit by the global downturn. traditional exports have fallen markedly since autumn last year. a contraction in the world economy will result in a substantial decline in norwegian exports ahead. moreover, due to the marked fall in commodity prices, export prices are now very low. a weak krone may help to maintain profitability in norwegian

, and to investments that exposed us to changes in liquidity premiums. the fund currently has extensive holdings of bonds, that despite high ratings, are difficult to trade in today ’ s market. realised losses have been limited. the flipside of large book losses is that this portfolio has a high yield, reflecting not only the increase in credit risk but also high liquidity premiums and fears and uncertainty in the market. history has seen a number of deep financial crises, and market conditions will return to normal in time. the true value of the bond portfolio will, at the very latest, be realised when the loans are repaid. more than 90 percent of the fixed income portfolio is rated a or better. even though rating agencies do not always prove to have the best evaluations, this still illustrates our conservative investment strategy. the fund is a long - term savings plan and capable of riding out large swings in the markets. this is the very foundation of the investment strategy with its high allocation to equities. our ability to adhere to this strategy in a critical phase – even if this should persist for some time – is crucial if the fund is to deliver the returns we expect in the longer term. we need to attach importance to the real value of equity investments and safeguard assets by spreading the fund ’ s investments. norges bank therefore supports the strategy that the government has chosen for the fund. under the fund ’ s strategy, more equities will be bought when equity prices fall and fewer when they rise. the fund therefore purchased a large volume of equities from 2001 to 2003 and is buying a considerable volume now. of the equities now owned by the fund, 40 per cent were purchased last year when prices were moving down. as a result, ownership in the business sector in the us, europe and asia has increased – in companies ’ human capital, in their machinery and equipment, brands and organisation. the fund now has holdings in almost 8000 companies and owns approximately 0. 77 per cent of global equity markets. in the long run, and even though many companies have now folded, investing in companies may perhaps be at least as safe as extending loans. thank you for your attention.